Defining Scaling - The Daily Gwei #247

Scaling Ethereum is critical to its long term success - but what actually is "scaling"?

Demand to use the Ethereum network has never been greater and users are literally paying hundreds to thousands of dollars in fees to use the network. Due to this, Ethereum is in dire need of scaling solutions and is making progress on multiple fronts here including at layer 1, layer 2 and off-network. But what do we actually mean when we say Ethereum is “scaling”?

Ethereum can scale in many ways at layer 1 including raising the gas limit (block size) to increase throughput, developing solutions such as Flashbots to alleviate high gas fees due to excessive MEV, DeFi protocols can aggregate user capital into something like a vault to minimize on-chain transactions and more. Once eth1 and eth2 are merged, there will be other solutions deployed such as sharding and statelessness. Most of these solutions help to increase throughput marginally (except sharding and statelessness which greatly increase throughput) but they also come with sustainability trade-offs - there is no free lunch with scaling!

At layer 2 is where things get really wild and, as you’re all probably well aware, we have many solutions live with more coming over the next 3-6 months. The 4 main categories of solutions here are zk rollups (Loopring, Starkware, zkSync), optimistic rollups (Arbitrum, Optimism), Validium/zkPorter (Immutable X, zkSync) and hybrid/commit-chains like the Polygon PoS chain. All of these solutions use different scaling techniques with different security and decentralization trade-offs as well as varying throughput gains but the key theme for all of them is offering must faster and cheaper transactions than Ethereum’s layer 1.

Now I want to ask the question - what really defines an Ethereum scalability solution? Is it the fact that it inherits Ethereum’s security? Is it that they increase Ethereum’s throughput? Is it the technology that they use? The answer to these questions is… maybe! Though I have my own definition - I believe that any scaling solution that pays the Ethereum network for security and/or uses ETH as its native asset is an “Ethereum scalability solution”. To expand on this - paying Ethereum for security simply means using its blockspace and paying fees in ETH to do so. As an example, Polygon’s PoS chain’s staking logic (smart contracts, slashing etc) lives on Ethereum which means that it pays fees to the network in ETH and the PoS chain also commits itself to Ethereum every so often which again, means that it pays fees to the network in ETH. This is also true for all of the other solutions I mentioned above.

Finally, we need to talk about “sidechains” which are quite poorly understood and there really isn’t a widely agreed upon definition of what they actually are. Though, in my view, a sidechain to Ethereum is something that does not inherit Ethereum’s security (like a rollup), does not pay Ethereum for security/infrastructure and does not commit itself to Ethereum in any capacity. Though what it can do is bridge into Ethereum for people to either send their assets across to the sidechain or vice versa. Technically I wouldn’t consider a sidechain an “Ethereum scaling solution” and I would even consider some of them to be somewhat parasitic to Ethereum (such as BSC).

All in all, Ethereum is scaling in many different ways across many different domains - there is not a one size fits all solution. We’re also still in the very early days of scaling with many projects still very new or preparing for mainnet rollouts over the next few months. Scaling Ethereum is a multi-year journey but it’s one that will be very well worth it in the end - are you onboard for the ride?

Have a great weekend everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.