Running With Rollups: Modular Layer-2 Blockchain Scaling Explained

A Short History

Arguably the most secure and trusted smart contract network today, Ethereum continues to be a game-changing zero-to-one innovation. The ubiquitous Layer-1 blockchain caused a seismic shift in blockchain use cases — from simply hosting cryptocurrencies to broadening utility for builders and users of decentralized applications (dApps) — as it pioneered its world computer vision.

Yet, in spite of its success as Web3’s main growth driver, its infrastructure remains inherently plagued by scalability woes. In 2022, over 7.75 million smart contracts were deployed on the Ethereum blockchain, including 4.6 million contracts in the fourth quarter alone. By comparison, there were 1,148 unique Solana programs in the same annual time frame — making it all the more pertinent to address the issue once and for all.

Even as the infrastructure of the main Ethereum network continues to upgrade itself, Layer-2 (L2) scaling solutions that continue to iterate and innovate on its underlying technology have taken the community by storm. The sheer transaction load on Ethereum has shifted L2 improvements from a desirable feature, to a crucial imperative for dApp developers to operate sustainably in terms of performance and cost.

A Rollup-Centric Vision

The rollup-centric vision set forth by Ethereum is the primary catalyst for L2 scaling innovations that we see today. Specifically, the two roll-up technologies available today — optimistic and ZK (zero-knowledge) proofs — are regarded for their respective abilities to drive greater efficiencies and scalability.

So, what’s a rollup?

L2 rollups rely on decentralized security derived from Ethereum but outsource transaction processing to separate third-party networks after ‘rolling up’ the data and then committing the information on-chain on the Ethereum mainnet.

• Optimistic rollups: Assumes transactions are valid by default and only runs computation via a fraud proof, in the event of a challenge.

• ZK rollups: Runs computation off-chain and submits a validity proof to the chain.

  
  

This effectively mitigates network congestion and enhances throughput speed, while splitting transaction costs across a batch of transactions — allowing as much as 10x-100x reduction of Ethereum gas fees. Furthermore, the combined advantages of higher transactions per second and lower fees increase L2 projects’ resource capacity for the improvement of user experience and expanded the scope of dApp deployment.

Importantly, Ethereum Virtual Machine (EVM) compatibility is required for rollups to work and is a core consideration for developers building dApps. The run-time environment for smart contract execution and Ethereum’s application code ensures cross-chain interoperability for dApps to interact seamlessly across multiple blockchains. Compounded with L2 benefits of providing competitively low gas fees, this has marked a decided shift among developers who now prefer to build on L2s rather than on the Ethereum mainnet. In fact, combined transactions from popular L2 chains Optimism and Arbitrum have been outpacing Ethereum’s on-chain transactions since December 2022.

That said, the L2 landscape is still very much in its early stages. ZK rollup development is still in its infancy, while optimistic rollups are also burdened by expensive data publication fees, constrained throughput, and a lengthy challenge period before transaction finality is achieved.

This is where modular blockchains come in, to overcome such limitations to unlock new use cases with the hope of ultimately moving the industry forward.

Understanding Monolithic Vs Modular Architecture

Although users experience blockchains as a single computing entity, blockchain nodes perform three main tasks:

1. Settlement: Maintain a historical ledger of valid transactions
2. Consensus: Participate in consensus to agree on the contents of the ledger
3. Execution: Update the state of the ledger in response to user / dApp submitted transactions

Blockchains like Solana and Ethereum 1.0 (pre-Merge) unify all three “layers” of operation within the same network. This means a node must divide its resources across all tasks at once — hence termed “monolithic blockchains”.

Modular blockchains take a fundamentally different approach. Instead of having all nodes responsible for performing several tasks concurrently, modular blockchains utilize a system whereby every function is performed by an independent network of nodes. By allowing each network to specialize in its task, resulting efficiency gains are able to pass on lower fees to users and better performance for dApps.

Specialized Data Availability

Data availability is an indispensable part of blockchain scaling. Alternative scaling solutions such as bridges, sidechains, and validiums do not gain data nor security from Ethereum itself and thus suffer from potential security compromises and trust implications as they form a disparate system without uniform data availability guarantees. The Wormhole exploit is a notable example. Some $325 million was stolen from what was once a widely-used DeFi bridge that links the Ethereum and Solana blockchains in one of the largest crypto hacks in history.

On the other hand, rollups typically outsource data availability and consensus to a shared base layer. This allows them to operate based on 1-of-N trust models, where N can’t be restricted. Security is upheld, but this poses operational problems in the optimistic rollup framework.

To uphold fundamental security assumptions, data from the rollup must remain available to give verifiers the opportunity to submit fraud proofs. As data availability is integral to maintaining the security model of rollups, expensive gas fees, and storage costs are still incurred on the Ethereum mainnet. In fact, the vast majority of transaction fees incurred on an L2 today go towards paying for data on Ethereum. On average, data publication costs for existing rollups account for 73-79% of the total transaction fee. When Ethereum experiences high network activity, this can inflate to more than 90% of total fees.

Modular architecture that uses a separate specialized data availability solution addresses this issue. Rather than posting transaction data to the Ethereum network, where data bandwidth is limited and therefore expensive, the use of a specialized data availability solution such as EigenDA leverages expanded data bandwidth from another protocol (or layer) for lower costs and faster improvement cycles.

EigenDA is unique in that it is built on EigenLayer, a restaking protocol that “rents” high crypto-economic security from staked assets currently being used to secure Ethereum. This frees L2 projects such as Mantle from establishing a new network, new token, and a new validator set to bootstrap its security base from ground up.

With the Ethereum validator set as a security source, Ethereum stakers can opt-in to re-stake their staked ETH to not only secure the Ethereum mainnet, but also secure any network, application, or service that utilizes EigenDA. As EigenDA nodes are specialized to the data availability task and are independently upgradable, proof of publication and data availability can happen at cheaper costs without compromising security.

Multi-Party Computation

Another trade-off for optimistic rollups is the lengthy challenge period before transaction finality is achieved. Funds can move easily from the Ethereum mainnet to the rollup, but withdrawals require a long challenge period in order to satisfy trust assumptions. For example, the current standard, implemented on both Optimism and Arbitrum, is a 7-day challenge period.

Alternatively, ZK rollups allow for near-instant finality but require complex technology that is still being developed and tested before it is made available in the market. It is worth mentioning that current ZK rollups do not have full EVM support, and are more intensive to run computations for applications with little on-chain activity.

A more feasible path is to implement architecture and incentive mechanisms that will allow a rollup to lower the challenge period now.

Multi-Party Computation (MPC) does just that. By introducing a new node role, the MPC node, the process affirms the validity of blocks produced by the sequencer. MPC nodes independently compute state roots from transaction data and provide a signature for valid state transactions. As more nodes sign the block, collective confidence in block validity increases.

As MPC signatures create cryptographic evidence to support network optimism, this offers an improvement over the current fraud-proof model by removing the tension of proof by contradiction. Effectively, this takes optimistic rollups from being default optimistic, to verifiably optimistic — creating a viable path for reducing the transaction challenge period to as low as 1-2 days.

Introducing the Next-Generation Modular Layer 2 for Hyper-Scalability

While numerous layer-2 solutions have emerged off the back of Ethereum, few have managed to convincingly overcome some of the biggest challenges facing Web3 ecosystems. On the one hand, technical hurdles such as security, fees, and speed have restricted mass adoption, on the other, siloed ecosystems have prevented the cross-pollination of communities and ideas. A new approach is needed if we want to achieve a scalable L2 solution.

By separating execution, data availability, and transaction finality into separate layers, Mantle offers Ethereum-level security while increasing transaction speeds through reduced inefficiencies. Transaction-related data is solidified on Mantle’s L2 before being broadcasted onto Ethereum, effectively trimming the challenge period and providing faster finality to the end user. In this way, Mantle is able to utilize Ethereum’s massive trust network while eliminating possible block space congestion through its modular design.

Such improvements to technology and infrastructure allow dApp developers to concentrate on building the best applications while lowering Web3’s accessibility barriers for end-users. For example, game developers can incorporate more elements on-chain without worrying about high transaction fees or struggling with poor end-user experience such as lags, while advanced DeFi protocols with multiple trading products can be developed and operated at a low cost.

Incubated by BitDAO, Mantle harnesses the power of a community-owned DAO to leverage its existing ecosystem of builders, users, and partners for member feedback and crowdsourced decision-making. Builders on Mantle benefit from increased standards of dev relations and incentives, robust ecosystem support, and expanded use-cases for dApp builders, as it constantly upgrades its network for meaningful hyper scalability.

As more users and developers gravitate towards platforms like Mantle, the future of Web3 will focus more on modular L2 blockchains that can offer Ethereum’s trust while delivering efficient speeds.

This article was written by jacobc.eth for mantle.