ConsenSys: How will Layer 2 develop in 2022?

Source: ConsenSys Blog

Compiled by: The Way of DeFi

As blockchains like Ethereum continue to expand, Layer 2 (or L2) solutions provide opportunities for millions of new users.

The options currently available are countless. The most promising L2 solutions are the so-called Rollups, such as Arbitrum, Optimism, StarkNet, and zkSync, among others. These vertical "mini-blockchains" have very similar security properties that extend from the Ethereum mainnet. Their common features include:

• Cheaper transaction fees (low gas)

• Faster throughput

• Trustless proof mechanisms

Rollups execute transactions in a new environment (i.e., off-chain) and bundle them together, then send the updated state and transaction data back to Ethereum. They use proofs to achieve security—some solutions use mathematical validity proofs, applying techniques from zero-knowledge cryptography, while others use game theory and staked value for fraud proofs.

In other words, Rollups are a bridge to off-chain state machines. The updated states executed on Rollups are then published to Layer 1 (or L1) and verified using validity or anti-fraud schemes in verification contracts.

In this article, we expand on the four main questions we posed to industry leaders who are building, researching, and developing L2.

• What are the main trends in blockchain scaling for 2022?

• Will L2 surpass the total value locked (TVL) of sidechains/alternative L1s in 2022?

• Which solution will break through in 2022? Which will not?

• As a new developer, should I choose to learn Optimistic or ZK rollups? Why?

Please note that these responses are their personal opinions and do not necessarily reflect the views of their entire organization.

How does Optimistic Rollup work?

In an Optimistic Rollup, the operator submits state transitions to L1, batching all transaction data with the state transitions. It assumes the state transitions are correct unless proven otherwise. With the given data, anyone can verify it. If someone can prove the operator's fraud, the operator's deposit will be slashed, and the prover will receive a reward.

After a predefined period, if no one is willing or able to provide a fraud proof, the state transition is accepted on L1 and considered the final state. This fraud window defines the withdrawal delay before anyone can extract assets from the Rollup.

The two main players in Optimistic Rollups include Arbitrum and Optimism, which have a 7-day withdrawal waiting period.

How does Validity Rollup work?

In a Validity Rollup or ZK Rollup, the operator submits a zero-knowledge proof of the state transition along with some transaction data to L1. The zero-knowledge proof of the state transition—which is difficult to create but relatively easy to verify—can be validated in L1's verification contract. The proof indicates that the state transition is correct.

Different zero-knowledge schemes are used—SNARKS and STARKS—each with slightly different properties and gas usage. Validity Rollups have minimal withdrawal delays because the state transitions are mathematically proven to be correct, ensuring that the current state is always valid.

Two notable teams using validity proofs include Matter Labs (building zkSync) and StarkWare (supporting dYdX, Immutable X, etc.).

Diving into L222

While industry buzzwords are dynamically changing in the crypto environment, some will continue to persist. Although these L2 scaling ecosystems are still young and much work remains, 2022 will become the L222 year for the Ethereum ecosystem as these different networks take off and gain traction. Ethereum's high gas fees will continue to drive the development of L2.

As these teams continue to focus on gas optimization, user experience, developer tools, and network limitations, they will begin to attract significant attention from developers, strengthening the entire Ethereum ecosystem.

Numbers and statistics provide a snapshot of the current state of L2 solutions and the potential market. Time will tell whether the market values more expensive security measures.

Currently, the five largest Rollups have a total value locked (TVL) of $5.51 billion, which can be used in these systems. Compared to the value locked in alternative L1s like Polygon PoS (>$5 billion) or BSC (>$13 billion), this is a relatively small amount.

Similarly, in terms of usage (measured by daily transaction count), the most used L2, dYdX, has about 200,000 transactions, which is one-tenth of Polygon PoS's approximately 3 million transactions.

However, we believe that achieving high value locked or daily transaction usage is easier than achieving Ethereum-like security. So even though L2 seems to be used by only a small portion of users today, we will see increasing usage and value growth as technology advances.

Perhaps to put it another way: the difference between L1 and L2 is that in L2, you need to pay an extra fee for the privilege of a completely trustless off-chain system. We do not know if users will pay extra to eliminate this trust.

The best way to understand L222 is to connect with those who are deeply involved. We gathered insights from research experts, founders of L2 teams, and blockchain engineers regarding their views on four key points.

1) Major trends in scaling for 2022

In terms of scaling, we identified four main themes for 2022.

Undoubtedly, 2022 will be the year of bridges. This could mean two things, as Rollups are essentially bridges that protect user funds in a specific way. On the other hand, there are some bridge protocols that allow interoperability between different Rollups.

Infura researcher Patrick McCorry believes, "Cross-Rollup fund transfers should ultimately become seamless without interacting with Ethereum." However, there is still a lack of trustless and decentralized bridge protocols for interoperability.

Optimism's chief scientist Ben Jones predicts, "We will get very good at moving ERC20 assets between these chains, and we will start to see the development of general messaging and application-specific bridges that are not just simple ERC20."

Additionally, the merge with Ethereum's proof of stake (PoS) will occur, "the mainnet will be used for determinism, and L2 will be used for computational narratives," says Faina Shalts from Truffle Suite. The merge itself will not have a significant impact on Rollups, as it will only change the L1 consensus layer.

However, the upcoming focus on danksharding will have a huge impact, although it is unlikely to happen in 2022. As Polynya states, "Danksharding turns Ethereum into a unified settlement and data availability layer."

Another major trend we will see is lower fees. So far, dedicated zk Rollups are generally cheaper than Optimistic Rollups. (It is currently unclear how expensive a general zk Rollup is per transaction). Peter Robinson from ConsenSys asks, "Can Optimistic Rollups reduce costs?" There are some ways to lower costs, and their team is working on optimizing compression techniques.

Reflecting on this, Angela Lu from Matter Labs mentioned, "Ironically, [last year] the timeline for Optimistic Rollups was overly optimistic, and building EVM-compatible sidechains was much simpler and an order of magnitude cheaper, thus meeting the market."

As a trend, we might also see "low fees being the primary concern for users right now." It may even be more concerning than decentralization, as shared by Ankit Maity from Polygon.

The final trend identified by experts is regarding developers. As a trend, Faina Shalts sees developers writing L2 native protocols rather than merely porting existing L1 Solidity code. Professional L2 smart contract developers may use Cairo or Zinc for coding.

More specifically, Angela Lu believes that with the rise of L2 native applications and blockchain use cases (which cannot be built under the constraints of the Ethereum mainnet), there will be vertical innovations [Rollup technology innovations].

2) Will L2 surpass the TVL of sidechains/alternative L1s in 2022?

It seems unlikely that L2 will surpass all sidechains and alternative L1s in 2022.

Faina Shalts states, "The security and decentralization of Ethereum are attractive to developers and those long-term in the field, but at least some L1s will continue to hold a leading position."

Ankit Maity says, "This year is the year of adopting Optimistic Rollups," although he does not believe they are ready for the next billion users.

Ben Jones believes that multiple factors will positively impact L2 in terms of TVL and transaction volume:

• Further optimization and cheaper gas costs

• Increased awareness of security issues

• Ordinary users gaining trust in these L2 systems, which are inherently harder to build due to their various proof mechanisms

While we may see an increase in TVL on L2 in 2022, we also need to see easy-to-use, accessible, and affordable cross-chain bridges for capital to move from alternative L1s.

Angela Lu states, "In the long run, TVL will trend towards providing more security and decentralization at a reasonable cost, along with application innovation chains."

While we fully believe in our design, the timeline for a complete takeover by L2 in 2022 is quite aggressive, as we encourage users not to move large amounts of funds to any L2 until they have been thoroughly tested on the mainnet."

For her part, it is important to remember that these L2s are early technologies, so they are not safe to use. L2Beat has detailed risk summaries for each Rollup that you can check out:

L2Beat's risk summary for Arbitrum

In summary, complete homogeneity of blockchains does not seem realistic. Many alternative L1s, like Solana and Binance Smart Chain, are cheaper but less secure—occupying considerable market value. Some transactions do not require the same level of security as others, and some may not even care about decentralization, focusing instead on cheaper fees and faster transactions.

A large-scale malicious attack on these networks could remind people of security risks and prompt migration. Remember last week's Solana Wormhole cross-chain bridge incident?

However, perhaps we should heed Patrick McCorry's stance of not worrying about L2 surpassing sidechains, but rather seeing if L2 can flip the TVL held by centralized exchanges like Coinbase.

3) Which solution will break through in 2022? Which will not?

When it comes to unsolved puzzles in 2022, nearly all experts are discussing EVM equivalence.

For Optimistic Rollups, we will see them gain traction in usage and tooling because they are almost equivalent to EVM.

"We see a lot of people deploying their projects because they realize it is actually as simple as changing the chainID and running the exact same script they did on the mainnet," Ben Jones observes. However, as different EVM-compatible scaling solutions go into production, users and developers will become more aware of the nuances of compatibility and the associated costs.

However, for zk Rollups, expectations rest on continuity. Some experts cautiously predict that we will see good solutions for converting code to EVM. Some believe that zkEVM proof of concept is feasible in 2022. Some even think we will see efficient zkEVM provers on the mainnet.

What we will not see in 2022 is trustless and seamless interoperability between L2s—essentially bridging. There are some protocols, and some teams are building on top of them. So far, most bridge projects are indeed trusted and centralized.

4) As a new developer, should I choose to learn Optimistic Rollup or zkRollups? Why?

If you are a new developer, do not worry. The consensus here is to learn Solidity and EVM.

"Solidity is a smart contract language with the richest developer tutorials, the most mature developer tools, and the largest developer community to support an individual's smart contract development journey," Angela Lu says.

As a new developer, you may want to be able to get things done quickly and build intuitively. The developer experience on Ethereum has significantly improved over the past three years, and by learning Ethereum, you will have the foundation needed to build Optimistic Rollups that are EVM-compatible, which does not apply to zk Rollups.

"zk Rollup currently requires understanding a different language that is optimized for the computations needed to make it work. For example, to truly gain the benefits promised by Starknet, you need to understand Cairo. This year is absolutely the best time to learn it, as the language is very new, and junior developers can quickly develop expertise.

There is no doubt that we will soon see roles like "Cairo smart contract developer" and "Zinc smart contract developer." Focusing on one of them is risky, as both major zk Rollups are expected to eventually be EVM-compatible, but I think learning one is a good return/risk calculation!

Warning—resources for learning Cairo or Zinc are not as plentiful as those for learning Solidity, so they will be harder to learn for a while," Faina Shalts says.

As a new developer, you may want to avoid jumping into an obscure programming language, as this could lead to extreme changes and potential errors, as that would be a more challenging route. However, the StarkWare team encourages developers to familiarize themselves with the idea that "every marginal transaction reduces the unit transaction cost, eliminates the gas limits present on L1, and opens up a world of new functionalities."

Depending on your experience level, you may want to explore zk Rollups to deploy L2 native applications. According to Angela Lu from Matter Labs, this can provide greater design space because:

• Fast L1 <-> L2 asynchronous messaging makes it feasible to create hybrid applications that leverage L1's applications and liquidity.

• Volition design enables different categories of users and applications across the entire security/cost spectrum to combine and interoperate in a system that spans many data availability solutions.

• The ability to publish only state differences to calldata will save a significant amount of costs compared to Optimistic Rollups.

Nicolas Liochon, head of R&D at ConsenSys, emphasizes that as a new project and developer, "In any case, a reasonable plan is to evaluate the properties of zk Rollups and Optimistic Rollups, see if Optimistic Rollups are good enough, at least in the short term, and then wait for the zk-EVM debate to settle."

Developer resources available to you now:

Ultimate Hackathon Survival Guide -- Learn Web3 (basic, intermediate, and advanced resources)

Cryptocurrency Course by Professor Patrick McCorry

ConsenSys Academy Blockchain Developer Bootcamp

Smart Contract Engineer Learn Solidity and Vyper

Infura Platform for your comprehensive developer toolkit

The Blockchain Trilemma Disappears

The blockchain trilemma refers to a widely held view that decentralized networks can only provide two out of three benefits—decentralization, security, and scalability—at any given time.

The blockchain trilemma: a triangle with decentralization, scalability, and security points.

Rollups are modular executions designed to solve the trilemma. By creating a transaction execution environment separate from Ethereum, they do not have to bear the responsibility of consensus and data availability. This allows Rollups to benefit from high scalability, security, and decentralization without compromising any of them.

Final Thoughts

In summary, the major trends in scaling we will see in 2022 include bridges, reduced fees, the merge, and developer migration. While significant progress will be made this year in EVM compatibility and EVM equivalence, we will not see L2 surpass L1 in TVL anytime soon.

Trustless and seamless bridging will take more time to mature, as it is a challenging puzzle. If you are a developer looking to get into the field, start by learning Solidity!

Ideally, new users should not even need to know they are on L2. It would be a seamless experience where they do not have to return to the mainnet while still inheriting its security. The proliferation of bridges, mature L2 infrastructure, and fiat on-ramps will help attract developer attention and user adoption.

Hopefully, soon, most people will use this technology without needing to understand what L2 or EVM means. Until then, we strive to stay at the forefront of the ecosystem and keep up with the developments being built and researched by many skilled and interesting people.