Most Layer 2 solutions are still struggling with scalability and cost challenges | Opinion

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As a researcher with extensive experience in blockchain technology and a deep understanding of Ethereum‘s ecosystem, I find myself increasingly concerned about the current state of L2 solutions. Having worked in various scientific, engineering, and leadership roles, I have come to appreciate the importance of scalability and efficiency in any technology platform.

After shifting towards a focus on Layer 2 solutions, the Ethereum (ETH) network has predominantly leaned on these methods for scaling. Nevertheless, these L2 solutions have faced challenges in maintaining competitiveness, particularly when compared to emerging platforms such as Solana (SOL). In the midst of the meme coin trend, Solana managed to capture a significant portion of the activity due to its strengths: affordable fees, swift transaction speeds, and user-friendly interface.

As a crypto investor, I find it crucial to delve into the reasons behind the fact that L2 solutions haven’t yet shown the scalability and cost benefits we all expected them to deliver.

Why meme projects favor Solana over Ethereum L2s

As an analyst, I’ve observed that meme projects have played a pivotal role in fueling the recent spike in market engagement. The preference towards Solana isn’t just about user-friendly aspects; it’s also rooted in several other factors.

  • Low fees: Solana’s low transaction costs make it ideal for fee-sensitive applications like memecoins.
  • High speed: Solana’s multithreaded architecture enables high throughput, ensuring seamless user experiences.
  • Better developer experience: Solana’s tools and ecosystem are optimized for ease of use, attracting developers and projects.

Why is scalability important?

Scalability is fundamentally measured by the number of transactions a blockchain can process. A highly scalable blockchain can handle more TXs while offering lower fees, making it crucial for widespread adoption and maintaining a seamless user experience.

It’s crucial for community-based initiatives such as meme tokens, as many have a limited lifespan and are sensitive to fees. If these projects lack scalability, they won’t flourish, and instead, users will move towards systems offering superior efficiency and affordability.

Why Ethereum L2s aren’t up to the challenge

Discussing one aspect, we find that Ethereum has been grappling with scalability challenges for some time now. To address these issues, Layer 2 (L2) solutions like rollups are being utilized as the principal method. These L2s function as separate blockchains, handling transactions off-chain and then posting the results and verification data back to Ethereum’s main network. By doing so, they maintain Ethereum’s security level, making them an enticing choice for overcoming scalability hurdles.

While Ethereum was initially conceived with certain limitations, its creator, Vitalik Buterin, himself acknowledges that scalability wasn’t a primary focus in Ethereum’s design. One of the main issues is the absence of multithreading in the Ethereum Virtual Machine (EVM). The EVM, responsible for transaction processing, operates as a single-threaded system, handling only one transaction at a time. On the other hand, Solana benefits from a multi-threaded architecture, enabling it to manage multiple transactions concurrently, thereby enhancing its overall efficiency and speed.

Layer 2 solutions like Arbitrum and Optimism share Ethereum’s inefficiency due to its single-threaded EVM architecture. For example, Arbitrum, with a gas limit of approximately 7 million per second and each transaction costing 21,000 gas, can process around 333 simple transactions per second. However, more complex smart contract calls consume even more gas, significantly reducing its capacity. Similarly, Optimism, with a gas limit of 5 million per block and a 2-second block time, can manage only about 119 simple transfers per second. Gas-intensive operations further diminish this capability.

One potential rephrasing could be: Fluctuating transaction costs in Ethereum and its layer 2 alternatives can become problematic during busy network periods. For apps that require consistent, low fees, this instability is a significant disadvantage. Even more so for projects like meme coins, where fee sensitivity is high, it makes Ethereum-based layer 2 solutions less appealing.

The advantage of using multiple Layer 2 (L2) solutions only makes sense if contracts on different L2s can work seamlessly together. Yet, rollups function like separate blockchains, making it difficult to share data between them, akin to cross-chain communication complexities. This inability to interact freely across L2s greatly restrains the potential for scalability.

What can L2s do to further scale?

Enhance the ability of different layers (L2s) to work seamlessly together by incorporating necessary features. Currently, Ethereum L1 could benefit from implementing more solutions that promote interoperability among its layers. For instance, the latest ERC-7786: Cross-Chain Messaging Gateway is a positive stride forward. Although it doesn’t completely solve the interoperability challenge, it makes communication between L2s and L1 easier, paving the way for future advancements in this area.

To keep up with multi-threaded blockchains such as Solana, Layer 2 solutions need to depart from Ethereum’s single-threaded Ethereum Virtual Machine (EVM) design and adopt parallel execution instead. This could involve significant changes to the EVM structure, but the potential for improved scalability makes it a promising direction for development.

Future milestones

For meme coins and other applications to thrive on Ethereum’s Layer 2 solutions, they must overcome substantial hurdles in terms of providing the required scalability and affordability. To remain competitive within the ecosystem, it’s essential to tackle underlying structural constraints, improve interoperability, and adopt cutting-edge advancements in blockchain architecture design. By making these changes, Ethereum L2s can attain the necessary scalability for broad acceptance and defend against challenges posed by upcoming blockchains like Solana.

Laurent Zhang

Laurent Zhang is the innovative founder and president of Arcology Network, which presents an unprecedented Ethereum layer-2 solution with a unique, multithreaded rollup – delivering exceptional performance and efficiency for developers constructing the future of decentralized apps. With a strong background in executive leadership and innovation, Laurent holds a degree from Oxford Brookes University. Over the past decade, he has honed his skills in various roles spanning science, research, engineering, and leadership. His career path began at MKS Instruments as an Algorithm Engineer in 2005. From 2010 to 2012, he worked as a research engineer at the Alberta Machine Intelligence Institute, followed by a stint as a research scientist at Baker Hughes from 2012 to 2014. As vice president of engineering at Quikflo Health between 2016 and 2018, Laurent continued to grow his expertise. Since 2017, Laurent has been leading Arcology Network as a visionary, envisioning a future where blockchain technology achieves its full potential, providing unparalleled scalability, efficiency, and innovation.

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2024-12-23 16:16