Intro to Scalability
Ethereum gas fees have risen astronomically as the network becomes more popular. The ability of retail investors to participate in new Ethereum-based offerings like DeFi is circumscribed by the ever-increasing cost of entry into the space.
Three main challenges presented by the success of mainnet Ethereum: 1. Spiking gas costs price-out market share and impact user experience. Best case is loss of low-value transactions and poor UX due to stuck transactions. Worst case is compromising healthy market operation like Black Thursday. 2. Block Latency is problematic in some applications 3. Pushing gas costs to users creates friction and impacts user experience. User has to navigate rather complex effects.
As a result, some users and products are migrating to other chains that offer lower costs. Off-chain scaling is capable of solving these problems by providing higher throughput, faster state advancement and gas cost abstraction. It can be transformative for application UX
State advancement (propagating new network state) is 10-100x faster (the rate at which data can be updated on-chain). Reducing user feedback loop from 12s to <1s. High frequency transactions possible (e.g. high-fidelity price oracles, rapid orderbook management)
Transactions are a fraction of the cost. Low or no-value transactions viable Support for native gas cost abstraction, meta-transactions, account abstraction. Subsidised gas, or gas cost is paid in relevant tokens. Better native support for smart contract wallets and features like social recovery.
If Ethereum is to maintain its dominance and network effect, it must scale.
Terminology
In the following sections, we’re first going to go through some of the types of Layer 2 solutions. Then walk through examples of popular Layer 2 solutions. We’re then going to talk about crosschain and blockchain interoperability. Finally, we’re going to have live sessions and presentations based around L2 platforms such as Polygon, Optimism and more.
In this section, we’ll typically refer to mainnet Ethereum as Layer 1 or L1 and whatever the scaling solution is as a Layer 2 solution (L2), a sidechain, sidechannel or a bridge.
Conclusion
These are exciting and very new topics, please be aware that they are considered very cutting edge and you should be extremely careful when using them. Also, please know that the documentation changes very regularly and perhaps not perceptibly. If you’re currently building on a Layer 2 solution, we recommend joining the project’s Discord, or wherever the community gathers, and making sure to follow their developer updates.
Let’s dive in!