In a speech at the 2021 Shanghai International Blockchain Week, Ethereum founder Vitalik Buterin acknowledged Ethereum’s urgent need for scaling and said that layer two blockchains would be the way to go for the near future.
Ethereum’s woes
Ethereum is still the undisputed GOAT regarding usage rates, decentralized applications, and developer activity. Unfortunately, it’s also a victim of it’s own success, with said activity rendering it virtually unusable for retail users, as gas fees can exceed $50 for a simple transaction. None of that is news, and Ethereum has been working on its Ethereum 2 update for years. It’s supposed to make the blockchain more scalable, secure, and sustainable and early phases of the Eth2 roadmap are to start soon.
However, Vitalik Buterin somewhat dampened hopes that the base layer of Ethereum would see a quick upgrade, saying that scalability of the so-called Beacon Chain would only come in the last major phase of Eth2, which is still years away. As Ethereum prepares to switch to proof-of-stake, swapping it for its electricity-intensive proof-of-work consensus mechanism, Eth2 is also going to add more blockchains to its ecosystem to become more scalable. The current Ethereum blockchain will become the Beacon Chain and will be one of 64 chains, as Ethereum implements sharding, a scaling solution native to Ethereum.
Yet, users and developers are calling for more scalability now, and “The Merge,” as the switch to sharding is called, will be a multi-year process. Aware of Ethereum’s shortcomings, Buterin addressed these issues in Shanghai, stating that there was an urgent need for scaling solutions and that layer two blockchains would be the only feasible way for now.
How layer 2’s can help Ethereum scale
Layer two blockchains are blockchains that are built on top of Ethereum. Several have already been launched, and solutions like Polygon and Arbitrum are quite popular among users and developers alike. Other promising candidates include Optimism, Loopring, ZKSync, and Hermez. Layer two blockchains provide a significant increase in scalability for Ethereum, as they handle transactions outside the main chain but post transactions on Ethereum. For users, this means reduced gas fees and a much smoother user experience.
Buterin underscored one particular layer two scaling solution, saying that ZK-rollups would be Ethereum’s go-to strategy for the near and mid-term future. ZK-rollups run computation off-chain and submit validity proof to the main chain, providing a complex but highly secure solution. Optimistic rollups, their main competitor, take a week for withdrawals, which does not make for a great user experience. Buterin also said that enterprise applications could use ZK-rollups when the technology was ready, making private blockchains unnecessary.
Particularly non-financial applications will be looking to switch to or launch on rollups. Buterin suggested that NFTs, Ethereum Name Service (ENS), and decentralized autonomous organizations (DAOs) would stand to gain the most from moving to rollups. With its competitors trying to chip away at Ethereum’s lead in users and decentralized applications, the market leader is well-advised on resolving its scaling woes as soon as possible.
