Hundredfold expansion, reaching 4,000 TPS? What are Ethereum's layer 2 scaling solutions Optimistic rollup (Op) and ZK Rollup?

The congestion of Ethereum goes without saying, and everyone deeply feels it. The Ethereum ecosystem is actively exploring the implementation of Layer 2 solutions. Layer 2 includes state channels, sidechains, Plasma, Optimistic Rollups, Zk Rollups, and more. Currently, the most promising technical solutions are Optimistic Rollups and Zk Rollups, abbreviated as OP and ZK.

(This article is authorized for reprint from Blue Fox Notes, with the original title "Layer 2 Track: Short-term OP, Long-term ZK", original article here)

For more information on Layer 2, you can refer to Blue Fox Notes' previous articles "Ethereum's Layer 2 Track," "Layer 2, Ethereum, and the Public Chain Landscape," "Breakthrough Progress in Ethereum Layer 2: What Does It Mean?"

Advertisement - Please scroll down for more content

What would the situation look like from the perspective of implementation?

Short-term OP, Long-term ZK

Based on observations from Blue Fox Notes, the short and medium-term focus is on Optimistic Rollups, while the long-term outlook is on ZK Rollup. Why?

*Optimistic Rollups Vs ZK Rollup

One of the main reasons why the Optimistic Rollups solution adopted by Optimist is easier to implement in the short term is its higher portability. ZK Rollup is currently not fully compatible with EVM.

One major drawback of Optimistic Rollups is the need to address fraud proofs, which results in withdrawal periods lasting up to a week. Users transferring their funds from Layer 2 exchanges to Layer 1 may not have the patience to wait for a week. ZK Rollup, on the other hand, overcomes this issue by providing timely withdrawals to Layer 1 through mathematical proofs, ensuring instant withdrawals. ZK Rollup's security is comparable to Layer 1, and deposits and withdrawals can be done instantly based on user needs, which is its advantage.

However, why is the Optimistic Rollups solution still the most important Layer 2 solution in the short term? This is because its drawbacks have solutions. If Op cannot handle it, other projects can assist. Some projects can help users instantly withdraw their Layer 2 tokens to Layer 1, with users paying a certain fee, and these projects handle the rest.

For example, the MakerDAO community proposed the Optimism DAI Bridge solution to address the week-long withdrawal time issue with Optimistic Rollups. Although waiting a week ensures the correctness of the Commitment Transaction Chain (CTC), proof of individual transactions under the chain can be obtained within minutes. Thus, MakerDAO will issue fDAI representing claims to Layer 1 DAI. fDAI is verified against CTC through Maker Oracle.

In addition to MakerDAO, other projects will also provide fast withdrawal services. Therefore, from the implementation perspective, logically speaking, OP is more suitable in the short term because of its higher portability and the availability of solutions to the withdrawal period issue. In the long term, ZK's security and withdrawal periods are advantageous, and as it fully supports EVM, the probability of its adoption in the future increases.

*Short-term OP

Optimist is being adopted by DeFi leaders, making it one of the most important Layer 2 solutions in the short and medium term.

Optimist, adopting the Optimistic Rollups technology, has launched a testnet and is expected to be released in March. Currently, Synthetic will adopt its solution. If Synthetic's implementation is successful, it will attract a large number of DeFi followers.

The leading DeFi platform Uniswap is reportedly considering using the Optimist project's solution, which, if implemented, would be crucial for the adoption of Layer 2 solutions in the entire DeFi space. However, in the style of Uniswap, it will be relatively cautious, and the rollout of the Optimism Layer 2 solution will not be too quick. At the same time, V3 is currently Uniswap's focus, which may delay its adoption of Layer 2.

On the other hand, Sushiswap has a more aggressive approach and may introduce a Layer 2 solution earlier than Uniswap. It is said that Sushiswap is exploring a Layer 2 implementation with Matter labs' Zksync, but no final decision has been made yet. If the Optimist solution proves feasible, it may also switch to the Optimist solution.

If Synthetic and Uniswap both adopt the Optimist project's solution, other DeFi projects may follow suit, ultimately leading to a scenario where Optimist dominates in the short to medium term within Layer 2.

Currently, Optimist, Offchain Labs (Arbitrum), Fuel Network, and Cartesi are actively exploring the implementation of this technology.

*Long-term ZK

ZK Rollup has advantages in security and withdrawal time, and once it achieves full compatibility with EVM, it stands a chance to gain more favor from DeFi projects. However, if the Optimist solution proves viable in practice, it will also impact the adoption of ZK, at least delaying its adoption process.

In the long term, over the next few years, as more DeFi projects adopt ZK Rollup technology, a trend may emerge where ZK Rollup networks will gradually interoperate, accommodating higher transaction volumes than Layer 1, thus forming a large Layer 2 ecosystem. This is why there may eventually be one or two very powerful Layer 2 projects.

Currently, Matter Labs' ZKsync, Loopring, Starware, Aztec, among others, are actively deploying ZK Rollup technology.

In addition, there are even Layer 2 projects specifically designed to expand NFT transactions, such as Immutable.

Layer 2 Is the Giant Race Track

According to Blue Fox Notes, the Layer 2 track ranks fourth after BTC, public chains (such as ETH), and decentralized stablecoins. Of course, DeFi as a whole is undoubtedly the largest track.

After the dust settles on the Layer 2 competition, one or two giants will emerge, becoming the ultimate Layer 2 solution, fundamentally solving the interoperability issues in DeFi. This situation means that future Layer 2 projects will be of extremely high value, possibly approaching Layer 1 and surpassing most public chains. If Layer 2 projects worth billions of dollars emerge in the future, it should not be surprising.

Ethereum L2 and EIP1559 Will Shift the Public Chain Competition

Once DeFi on Layer 2 is operational, it will be noticed that transaction fees are very low and transaction speeds are fast on Layer 2. This will greatly increase the user base and transaction volume of DeFi, especially DEXs. With the increase in transaction volume and user base, liquidity providers will also become more attractive, leading to further migration to Layer 2 by users and liquidity providers.

During the evolution, Layer 1 and Layer 2 will form a hierarchy in DeFi, creating a certain degree of fragmentation. Ultimately, Layer 1 and Layer 2 will reach a balance. The Layer 2 ecosystem will have a larger capacity, but Layer 1 will remain important, providing security for Layer 2 and various high-value settlements. Layer 1 is the ultimate settlement layer.

For the Ethereum and public chain competition, the implementation of Layer 2 can partially alleviate Ethereum's high fees and slow speed, thereby reducing the attractiveness of other public chains.

With the arrival of Ethereum's expansion, coupled with the implementation of EIP1559, ETH will undergo its most significant changes this year. This will have a crucial impact on the public chain landscape this year.