Written by: Yasmine Karimi, Nansen
introduce
introduce
image description
The rise and fall of Ethereum gas fees from 2015 to 2021
Whenever gas fees skyrocket again, a discussion about the scalability of the ethereum blockchain takes center stage again, while many race to find the next competing blockchain to invest in. In fact, we have to face that gas fees are just the tip of the iceberg. The reason why the gas fee is so high is that the current Ethereum has not been able to scale up, that is, there is still more demand for transactions than the Ethereum blockchain can actually afford each time.
first level title
Discussion of scaling issues for beginners
Blockchain is a mode of processing transactions and recording them in blocks. The creation of blockchain does not require a trusted authority and avoids double spending. Early blockchains, such as Bitcoin and Ethereum, based their consensus models on proof-of-work for processing and recording these transactions.
In the proof-of-work model, when you initiate a transaction, it will be placed in a pool of pending transactions and propagated to all nodes in the network. While it is propagated to all nodes, only one miner computes the transaction and validates it by adding it to a block with other transactions, earning a gas reward for mining.
First, transactions are propagated to the network both before and after they are validated, making transactions take a long time to process. Second, the computing power required for digital calculations consumes a lot of electricity. Finally, there is a limit to the number of transactions a block can contain, which creates competition among users and also drives up gas fees—the minimum price a miner is willing to accept to process a transaction—increasingly, and sometimes more than is currently being done. The value of the transaction. This is increasingly becoming an issue as more dApps that utilize blockchain technology to process and store transactions are built on mainnet (about 3,000 currently).
It can be seen that in order to solve these problems, Ethereum must be expanded, which can be achieved by increasing the number of transactions that the network can handle (measured in TPS, transactions per second) and transaction speed. To this end, some expansion schemes are already under development, mainly Ethereum 2.0, which targets layer 1 expansion schemes, side chains, and layer 2 expansion schemes. Layer 1 scaling solutions such as Ethereum 2.0, Polkadot, and Solana structurally change the underlying consensus and chain model of Ethereum, while layer 2 scaling solutions are built on the Ethereum mainnet and its protocols.
The stakes are high and the risks are high. The few blockchains that stand out in this race will power the entire DeFi space and NFTs, sustain DAOs and virtual worlds, while also powering the entire creator economy and metaverse.
first level title
A Brief Overview of Ethereum Scalability Solutions
image description
Scalability Solutions 2021, by @yasminekarimi_
secondary title
Layer 1 Expansion Scenario
The layer 1 solution deals with the underlying protocol, which is the code of the mainnet blockchain itself, in order to improve the transaction capability of the blockchain. They can be further divided into:
protocol improvement
Protocol improvements are changes made to the underlying protocol to expand transaction throughput, specifically by increasing the number of transactions that can be placed in a block (sustainable only in the short term), reducing the time lag between block creations, Or through a structural shift from the proof-of-work consensus model to proof-of-stake. Unlike the Proof-of-Work model, Proof-of-Stake selects validators based on the amount of coins they have staked in the protocol. Since validators are selected on this basis, there is no longer a need for massive amounts of computing power, and there is no competition among miners with astronomical gas fees. Verification times for transactions are much shorter because individual nodes don’t have to devote as much processing power as PoS-based blockchains Solana 30,000 TPS and Polkadot 1000 TPS. For comparison, Ethereum can only handle 16 TPS.
Fragmentation
secondary title
Layer 2 Extension Scenario
side chain
side chain
First, you can move assets to sidechains with more desirable transaction fees and speeds (for example, the delegated proof-of-stake consensus mechanism used by xDai allows 5-second TPS at $0.000021). The cross-chain transfer of assets is realized through the two-way peg (2WP) protocol, which locks assets on the first chain, and then creates a transaction on the second blockchain, whose input information contains encrypted proofs, proving that Locking is correct. A perfect example of this is Polygon.
Plasma
state channel
state channel
State channels are open-source protocols and smart contracts that allow participants to make x transactions off-chain but only submit two on-chain transactions to the Ethereum network. When a user opens a channel for the first time, they must create and pay an Ethereum transaction. And when it's time to close the channel, the user must pay a fee to process the transaction on the Ethereum blockchain. This reduces the number of transactions that must be processed and stored, and reduces gas costs to just the cost of opening and closing a channel. Major projects utilizing state channels on Ethereum are State Channels, Celer, Perun, and Raiden.
Rollups
Rollups store state data in a Layer 1 scaling scheme by aggregating transactions in a single "batch", using compression tools (e.g. scientific notation to reduce value length in bytes) and validating them off-chain In order to expand the main network. Compression and batching lead to higher throughput, making each transaction faster and at a lower cost.
first level title
How should I interact with Arbitrum rollup as a user?
first level title
Why Arbitrum will lead the scaling of Ethereum in the near future?
Arbitrum solves the blockchain trilemma: scalability, decentralization, security.
image description
text
image description
Total daily gas fees paid on Arbitrum and Ethereum
first level title
Arbitrum is the most EVM-compatible layer-2 scaling solution to date
image description
The daily number of verified addresses on Arbitrum
image description
Total number of unique addresses on Arbitrum over time
image description
text
In simple terms, it is built on top of the king of the cryptocurrency space - Ethereum
Another reason we believe rollups like Arbitrum will dominate Ethereum’s scalability for years to come is that they are built on Ethereum, which is the king of the crypto space. This gives them a first-mover advantage. First, Ethereum remains the most popular blockchain protocol in the world in terms of usage, with over 3,000 dApps, DeFi, NFTs, DAOs, and virtual world ecosystems on it. Bitcoin is the only comparable blockchain in this regard, but it lacks the ability to host rollups.
Second, unlike most people who believe that Ethereum 2.0 will make rollups obsolete, considering that Ethereum 2.0 will not be fully deployed in a few years, rollups such as Arbitrum should be the first de facto scaling solution. On the contrary, data sharding, the second step of Ethereum 2.0, is mainly to speed up rollups. There is the status of rollups split storage, the history of split transactions, and rollups registering themselves in specific shards. The throughput scalability of rollups is exponential, and it is possible to reach 15 million TPS by 2030 .
For these reasons, it is clear that rollups like Arbitrum are uniquely positioned to lead the wave of Ethereum scalability solutions in the near future.
Get Ready for the Arrival of Layer 2 Scaling Solution Tokens
first level title
Some challenges currently faced by rollups
The first challenge is that for optimistic rollups, the withdrawal period is very long. Withdrawals may take up to 7 days as withdrawals are subject to a delay to allow time to publish evidence of fraud and cancel the withdrawal if the transaction is suspected to be fraudulent.
Second, the condition for securing optimistic rollups is that at least one node is honest and able to identify fraudulent transactions.
Beyond that, while we can expect moving assets and data via rollups will become increasingly easier, rollups are still in their early stages and are not yet interoperable. Still, there are interoperable solutions like Hop, Connext, cBridge, and Biconomy.
first level title
rollups five years from now
Realistically speaking, the potential of rollups is not limited to Ethereum in the long run. The future of scalability solutions is actually a more complex system of interdependent scaling solutions on a chain of multiple Layer 1 scaling solutions. In this complex future, we can still expect three main trends.
As mentioned above, in the short term, rollups on Ethereum such as Arbitrum will dominate the landscape of scaling solutions, which will then be further strengthened by the deployment of Ethereum 2.0 and its sharding scheme. Layer 2 scaling solutions, including but not limited to rollups, will exhibit progressive aspects and become increasingly performant, competing with layer 1 scaling solutions in terms of execution.
Next, when other competing layer 1 scaling proposals reach full capacity, they will increasingly start building rollups on top of their mainnet. In fact, most people still don't understand the potential of rollups, and every layer 1 scaling solution will need rollups. Ethereum is just the first one that has been preparing for it, and has been for quite some time (since 2015). Tezos, for example, is embracing a roadmap centered around rollups. The same goes for NEAR, Celestia, and Polygon, who just recently announced advanced zk-STARKs (derived from zk-Rollup) based on the scaling solution Polygon Maiden.
in conclusion
in conclusion
In short, high gas costs are really just the tip of the iceberg. Ethereum has been facing scaling problems since its inception, and many current scaling solutions are aimed at solving this problem. Among them, Arbitrum rollups is not only the largest Ethereum layer 2 network at present, but also has the potential to dominate the expansion scheme in the next few years. As it turns out, Arbitrum rollups have the ability to scale Ethereum without compromising the decentralization and security of the mainnet. As more users trying to get the best possible price turn to Arbitrum, more developers will build on it because it is the most compatible EVM. Ethereum aside, rollups are also a paradigm that will be exported to other competing layer 1 scaling solutions and incorporated into a variety of scaling solutions that are becoming increasingly complex.
For everyone in the cryptocurrency space, layer 2 scaling schemes like Arbitrum are not just an investment matter, they are the foundation of ongoing and future projects in the DeFi, NFT space that will not only sustain DAOs and The virtual world will also support the entire creator economy and metaverse.
Original link: https://www.nansen.ai/research/arbitrum-the-future-of-blockchain-scaling
