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Rolling Up the Decentralization Stages | Layer 2 Review

Quick Reads and Hot Links Covering the People and Projects Who Are Scaling Ethereum

Aug 16

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Dear Frens,

Welcome to this week’s L2 review, where we explore the latest updates and upgrades shaping the future of scalability and efficiency in blockchain technology.

Ethereum L2 transactions have soared to a record 12.5 million, with Coinbase’s Base and Arbitrum One leading the charge. Conversely, L2 fees have dropped significantly from a peak of $4.2 million in March to just $171,514 on August 13, showing improved efficiency following the Dencun upgrade. The stablecoin market cap on L2s now stands at $9.69 billion, though active addresses have fallen by 16.23% to 5.29 million.

Cronos zkEVM has just launched its ZK chain on the alpha mainnet, joining ZKSync’s Elastic Chain vision. The zkEVM comes with exciting features like a custom gas token, layered yield, account abstraction, and much more.

This issue’s editorial touches on the subject of rollup maturity stages, exploring the advancements on the path toward complete decentralization of Ethereum’s layer 2.

Scroll on to stay tuned on the latest updates and insights!

Contributors: Ritaakubue, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Building a unified Superchain

🆕 Arbitrum and Optimism becomes the first full-EVM rollups to reach stage 1.

🔀 Race joins the Superchain

➿ The Superchain is enabling onchain creativity!

🔥 Hot News

Interoperability at its Finest

Optimism's development team has unveiled an ambitious roadmap to enhance interoperability within its Layer 2 ecosystem, known as the Superchain. This plan aims to seamlessly connect various chains like OP Mainnet, Zora, and Base, addressing the current fragmentation of assets and users across the network.

The Superchain currently relies on Ethereum's Layer 1 for secure communication and asset transfers. The proposed native interoperability solution seeks to create a unified experience, allowing users, assets, and developers to move freely across different chains as if they were operating on a single blockchain.

Key features of the implementation will include a cross-chain messaging protocol, a universal token standard called SuperchainERC20, and an interoperable fault-proof system for secure asset transfers. The rollout plan involves a phased approach, starting with a developer network, followed by a testnet, and ultimately a mainnet launch.

The roadmap extends beyond the Superchain, aiming to standardize user experiences across the broader Ethereum ecosystem. This includes adopting universal cross-chain interfaces like ERC-7683 for asset transfers.

To get more information about this update check out the post below 👇🏾

🏛 Governance

💬 Proposals in Discussion

Arbitrum

Optimism

A case for the organizational chart

Polygon

Starknet

Immutable Component Config

Rolling Up the Decentralization Stages

Author: Lucent

On June 10, 2024, Optimism achieved a significant milestone by attaining stage 1 decentralization. This achievement was marked by the launch of permissionless fault proofs on its OP Mainnet, enabling users to execute withdrawals without the need for centralized third-party intervention. With this development, Optimism joins Arbitrum as one of the leading rollups in this category.

In a recent X post, Vitalik Buterin praised both Arbitrum and Optimism for becoming the first full-EVM rollups to achieve stage 1 in the quest for full decentralization. He also expressed his anticipation for the first zk-rollup to reach this milestone. While we provided a primer on rollup stages earlier this year, this article goes a little step further to explain the decentralization stages and how stage 1 rollups like Arbitrum and Optimism are advancing towards stage 2.

Understanding the Stages of Rollup Decentralization

Achieving full decentralization is a gradual process, like the growth of a child into adulthood. Stage 0 represents the "baby stage," where rollups operate under centralized control, with the development team holding significant authority. This centralization allows the team to censor transactions or block withdrawals, providing a safety net during the early development phases.

Stage 1, which can be likened to an "adolescent stage," introduces a degree of decentralization, though the system still retains some oversight. A critical component of reaching stage 1 is the existence of a functional proof system. Additionally, a security council oversees the network. Importantly, at least two council members must not be from the development team. Users are also provided with a seven-day exit window to withdraw funds independently, a safeguard against significant changes.

With Optimism now joining Arbitrum in stage 1, these rollups have implemented all the features outlined above. Reaching this stage is a significant step toward full decentralization. But what factors have given these rollups an edge in achieving stage 1 decentralization?

Do Optimistic Rollups Have an Edge?

One notable observation is that the general-purpose rollups currently in stage 1 are predominantly optimistic rollups. Base's recent introduction of permissionless fault proofs on its Sepolia testnet demonstrates how close it is to reaching stage 1. Furthermore, FuelV1, a stage 2 rollup, also uses optimistic rollups, highlighting the potential of this technology to advance through the stages of decentralization.

dYdX and zkSync Lite, which are zk-rollups currently having the stage 1 tag are only application-specific rollups that do not require EVM compatibility. As it stands, no general-purpose zk-rollup has attained stage 1 decentralization.

Several factors contribute to the faster development of optimistic rollups. Their full EVM equivalence facilitates seamless integration with existing Ethereum applications without requiring modifications, making it relatively easy to deploy the infrastructure necessary for attaining stage 1 decentralization.

The same can’t be said of general-purpose zk-rollups that use the zkEVM. The complexity introduced by zkEVM presents execution challenges that may slow their progress toward stage 1. This is because of the tradeoff between EVM compatibility and performance associated with the different types of zkEVMs.

The Path to Stage 2

Progressing to stage 2 decentralization presents a formidable challenge for the teams working toward it. However, Optimism co-founder Karl Floersch remains confident that his network will achieve stage 2 soon. According to Floersch, once a network reaches stage 2, others are likely to follow in due course.

Arbitrum has already made significant strides toward stage 2 with the introduction of the BOLD dispute resolution protocol. This proposal aims to empower honest participants to defend against malicious claims, playing a crucial role in the further decentralization of rollups.

At present, DeGate V1 and Fuel V1 are the only two networks having stage 2 decentralization. The question now is which of the stage 1 rollups will be the first to join them? It's only a matter of time before we find out.