gm anon,
Notice: I believe in a multi-chain future, however this is predominantly an Eth layer article.
2021 was the year of L1s, will 2022 be the year for L2s? Before we explore the intricate nuances of the battle of L2s, lets do a little anti-crypto-substack hack and keep things really simple.
We will specfically be covering Ethereum (Layer 1) and Rollups (Layer 2).
This story is called The Village and The Well and we’ll be contrasting it side-by-side with another story Ethereum and the L2s
Once upon a time there was a small village of 1000 people, everyone lived in harmony. They loved their life and had everything in order, all was well in the world. The villagers would go to the lake to get freshwater and would share food with one another, while sitting around a nice fire to end their day — a true utopia.
Once upon a time, Ethereum only had a few hundred thousand transactions a week, everyone used the chain with great efficiency and minimal lag. NFTs would take days to mint out, transaction costs were almost negligible, and the OGs were active on most discords — a true utopia when Vitalik responding to your meme was actually possible.
As the years went by, the village grew. First to 1100, then 2500, then 10,000. Soon enough, the lake got a little drier, and the water buckets became heavier to carry, it became harder to share food. Hunters would need to travel further and it would take a longer time to get everyone fed. The fire was no longer large enough to fit everybody, yet people kept cramming near it.
Since the massive surge in new wallets coming into Ethereum, first starting in 2017, and then an even bigger boom in 2021, every user of the blockchain has experienced the same issue — GAS. Oh man, we have gas don’t we? We’ve had so much gas that there have been 3 major gas-related airdrops, just to remind us of how much money we have spent on it — worst thing? Even that cost gas (rip fees.wtf airdrop ifykyk). We also struggle with less efficient processing speeds, MEV issues, and just general congestion.
One day, a group of scientists, physicists and engineers from the village got together and started brainstorming — how can we make sure everyone gets fed, watered, and nurtured in the way they need? After many fortnights of back and forth, they all realised they knew what they had to do. Within the next few months, these brave innovators came up with the very first concepts of irrigation, water pipes, farming, wells. All of these things allowed them to create a society that was self sustaining — they created more settlements outside the main village where people could move to, farm, host fires, and more and formed a sustainable life for the entire community for generations to come.
Many of the blockchain spaces smartest minds were able to figure out a solution to Ethereum’s issue with scaling, and sought to fix it: enter Layer 2s. There are a few types of L2s, but for the purpose of this we will group them into a general category — systems that help Ethereum/L1s scale (there will be a separate article on Optimistic vs ZK rollups in the future). Layer 2s are the irrigation systems, the wells, the water pipes, that allow the magic of Ethereum to transpose itself across more people. In this case, the power of decentralization is water, and the pipes that transport this in a fast and seamless way, are L2s.
We know many other L1s gained prominence in 2021, and many had a clear value proposition in being less expensive, more composable, and faster than Ethereum. The reason why Ethereum may be slower is to do with a stark emphasis on reliability and security. Many of these L1s have had issues with downtime, people calling them decentralized and so-on, but Ethereum is always running, and is always decentralized. So in come L2s like Arbitrum, Optimism, Starkware; these L2s benefit from the security and reliability of Ethereum, while having significantly lower fees and higher speed.
The blockchain trilemma has historically been that you can only pick two out decentralization, scaling, security. Well, the strong promise set forth and enacted on by L2s sets to change that.
Ethereum’s choice to prioritize decentralization has paved the way for other L1 blockchains to focus on cost-minimization. Their lower fees are almost non-existent compared to ethereum which makes them very attractive to new developers and users. L2s are here to challenge that, and provide the best of all worlds.
Stay tuned for the next edition where we dive into all the different types of L2s!