Ethereum's network congestion and high gas fees have long been significant pain points for users. Enhancing user experience through efficient and secure scaling solutions has become an urgent priority.
There are two primary scaling directions. The first involves Layer 1 scaling, a core focus of Ethereum 2.0, which aims to increase blockchain throughput via sharding and Proof-of-Stake (PoS) mechanisms. The second is Layer 2 scaling, where secondary networks are built on top of Ethereum or other public chains to boost transaction speeds.
Given the soaring demand from various DeFi projects and dApps—coupled with the uncertainties surrounding Ethereum 2.0's rollout—Layer 2 solutions have emerged as the preferred near-term approach.
Comparing Layer 2 Scaling Technologies
Layer 2 scaling technologies include state channels, sidechains, Plasma, Optimistic Rollup, ZK Rollup, and Validium. Among these, Rollup has gained significant traction and is strongly endorsed by Vitalik Buterin.
While Layer 2 offers diverse solutions, Rollup and Plasma are considered the most promising based on economic design, security, and efficiency.
Before Rollup, other solutions—including state channels and Plasma—could not guarantee that funds locked in their contracts were as secure as those in stateful contracts. In state channels, users risk fund theft if old states are submitted to the main chain. In Plasma, users must rely on operators to provide state proofs, creating trust assumptions.
Vitalik Buterin noted in An Incomplete Guide to Rollups that Rollups differ from earlier Layer 2 solutions by supporting general EVM code, allowing easy migration of existing applications. Although still early-stage, Rollups are developing rapidly. Projects like Loopring and zkSync have been operational for months.
Why Is Rollup Championed by Vitalik?
In October 2020, Vitalik published A Rollup-Centric Ethereum Roadmap, advocating for enhanced ETH 1 infrastructure to support Rollups as a near-term priority.
Rollup primarily follows two technical paths: ZK Rollup and Optimistic Rollup. The former uses zero-knowledge proofs, while the latter relies on fraud proofs. Both are among the most secure Layer 2 options.
Rollup bundles sidechain transactions into a single transaction, submitting only a cryptographic proof to the base layer. This approach processes all state and execution off-chain, with Ethereum mainnet storing transaction data—addressing Plasma's data availability issues.
Optimistic Rollups excel in general-purpose computation. Unlike ZK Rollup, which is suited for specific applications like payments and trading, Optimistic Rollups can support nearly all Ethereum functionalities, including DeFi smart contract composability.
ZK Rollup offers superior security. By using zero-knowledge proofs, it executes computations off-chain and submits a single proof for Ethereum verification. It also stores sufficient data to accurately determine off-chain account states, providing security equivalent to Ethereum.
In terms of scalability, ZK Rollup outperforms Optimistic Rollup. For value transfer and trading, ZK Rollup is currently considered optimal. Tether is even considering migrating ERC-20 USDT to a ZK Rollup Layer 2.
Vitalik's views further highlight ZK Rollup's potential. He tweeted that Optimistic Rollup might lead in general-purpose EVM computation short-term, while ZK Rollup could dominate simple payments, exchanges, and application-specific use cases. Medium- to long-term, ZK Rollup is expected to outperform across all use cases as ZK-SNARK technology improves.
Although Rollup may seem like a stopgap before Ethereum 2.0, it will remain valuable long-term. Even after Ethereum 2.0 launches, Rollup technology will continue enhancing throughput and network usability.
How Does Loopring Achieve High Throughput and Low Fees?
Projects based on Rollup technology are gradually increasing, with some already deployed. A few perform exceptionally well in throughput, transaction fees, and security.
For example, Loopring launched its 3.6 version API in late December. Developers can use this API to interact with Loopring's ZK Rollup network, enabling gas-free transfers, trades, and swaps. This results in lower fees, higher throughput, and security equivalent to Ethereum mainnet.
While Ethereum processes only about 10 transactions per second (TPS), Loopring handles up to 3,000 TPS. Additionally, Loopring's DEX metrics show significant growth.
Within less than a month of its launch, Loopring 3.6 reached a total trading volume exceeding $130 million, with over 12,756 accounts and a total transfer value surpassing $150 million. The average DEX transaction cost was $0.2557—significantly lower than Uniswap and other decentralized exchanges.
Loopring Protocol derives value from protocol fees based on trading volume, paid by exchange operators. LRC, Loopring's native token, has seen substantial price appreciation.
On January 7, Loopring DEX launched an AMM liquidity mining program lasting 14 days. It supported three pools: LRC/ETH, ETH/USDT, and WBTC/ETH, each offering 400,000 LRC rewards, totaling 1.2 million LRC. Notably, this mining occurs on Layer 2, eliminating high gas fees and enabling faster transactions—a novel experience for DEX users.
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Rollup's Short-Term Limitations for Ethereum Congestion
Despite broad support, Rollup's ability to alleviate Ethereum congestion remains limited in the short term.
From a developer perspective, migrating code to Layer 2 requires modifications, incurring audit and maintenance costs. This may reduce willingness to migrate. If Layer 2 projects improve infrastructure and lower entry barriers, development and adoption could accelerate significantly.
Users face similar challenges. Ethereum's mainnet ecosystem is already vibrant and relatively easy to use. In contrast, Layer 2 currently lacks abundant applications for trading, payments, and other uses, resulting in a less friendly experience. Ensuring seamless and intuitive interaction with Layer 2 is a critical challenge for developers.
Before Ethereum 2.0 arrives, Rollup may be the most suitable Layer 2 technology for mitigating congestion. However, this depends on infrastructure improvements, enhanced user experience, and reduced technical barriers. Once achieved, it could greatly enrich Ethereum's application ecosystem.
Frequently Asked Questions
What is Rollup technology?
Rollup is a Layer 2 scaling solution that processes transactions off-chain and submits cryptographic proofs to the mainnet. It enhances throughput and reduces fees while maintaining security.
How does ZK Rollup differ from Optimistic Rollup?
ZK Rollup uses zero-knowledge proofs for validation, offering higher security and scalability. Optimistic Rollup uses fraud proofs and supports general-purpose smart contracts.
Can existing dApps migrate to Rollup?
Yes, Rollup supports EVM-compatible code, allowing dApps to migrate. However, modifications may be needed, requiring audits and updates.
Is Rollup secure?
Rollup provides security equivalent to Ethereum mainnet for fund safety. ZK Rollup offers stronger cryptographic guarantees.
Will Rollup become obsolete after Ethereum 2.0?
No. Rollup will continue complementing Ethereum 2.0 by further improving throughput and usability.
How can users access Layer 2 applications?
Users can interact with Layer 2 via supported wallets and dApps. The experience is becoming more seamless as infrastructure develops.