In its near-decade of existence, Ethereum
ETH
has experienced remarkable evolution, yet it’s only recently that significant advancements have been made in addressing its pressing scalability challenges. The new rollup-centric roadmap is scaling Ethereum today, but its eventual completion may see the blockchain take a completely different form in a few years.

Ethereum scalability became an important talking point almost as soon as the blockchain went live in 2015. As the first generation smart contract blockchain, it has succeeded in generating tremendous adoption for this new form of computation. But in times of high activity, its performance limitations became apparent, resulting in congestion and high transaction fees.

Rollup technologies, such as optimistic rollups and zk-rollups, have been designed to offload execution from the Ethereum mainnet to the rollups, enabling numerous rollups to handle vast amounts of computation without congesting the Ethereum main chain.

The rollup-centric roadmap fully emerged in 2020 as the new, more mature solution to scalability. At its core lies a new idea of separating consensus from the execution of the blockchain’s transactions — centralizing, in a sense, the consensus on the main Ethereum chain, and “off-loading” the computation elsewhere. However, offloading via rollups is not the only challenge; Ethereum also faces limited storage and interoperability issues.

The upcoming “proto-danksharding” proposal is set to introduce a new type of optimized and temporary storage in the Ethereum blockchain called a “blob,” which is specifically designed to be used by rollups. Unlike other types of data, the EVM cannot directly process it, though it can verify that it has been included.

There are still limits to how much data could be stored inside Ethereum. Consequently, new ideas on how to borrow its security properties without using the blockchain itself are emerging. EigenLayer is currently the most well-positioned protocol aiming to do just that with its re-staking feature. In a nutshell, Ethereum stakers would be able to subscribe to secure services such as a data availability layer through the EigenLayer modules, receiving extra rewards from this activity.

The last missing piece is interoperability: ensuring that applications hosted at different rollups, layers and components can communicate efficiently with each other. A large number of bridges and interoperability solutions have emerged to take on this responsibility: Wormhole, Axelar, DeBridge, Hyperlane to name just a few. But it will be some time before these protocols live up to their full potential.

If all execution has been offloaded from the Ethereum mainnet to rollups, what remains, and why is Ethereum still needed? What is Ethereum’s true value? The answer lies in security, i.e. the immutable and ever-growing ledger protected by the ETH consensus protocol. Security is Ethereum’s primary value, and the effort to scale Ethereum can be viewed as solving the problem of sharing security from the Ethereum main chain to all these rollups while increasing scalability.

In this vision, Ethereum would become a shared security layer for multitudes of rollups and services, which would rely on the value and security of Ethereum without sharing the limitations of its blockchain’s capacity. Such an approach supercharges the principle of separating consensus from execution, potentially making huge strides in scalability for blockchains overall.

Bitcoin
BTC
developers’ vision has always been to scale through Layer 2 solutions, but more advanced use-cases have been limited by the need for custodial bridges. Novel technology utilizing zero-knowledge proofs (ZKP) could solve this conundrum, finally enabling true Bitcoin smart contracts.

Nut-paragaph: Besides value storage, Bitcoin holders cannot do much with their Bitcoins due to Bitcoin network’s limited block space and lack of programmability. The emerging zero-knowledge techniques could generate succinct and easily verifiable proofs about many types of events, which could allow the Bitcoin network to perceive the outside world and, thus, enable limited use cases.

So far, the ZeroSync initiative has emerged as a concerted effort to bring ZKP to Bitcoin. Its first goal is to enable ultra-fast syncing of the Bitcoin blockchain enabled by ZK verification. Eventually, it wants to build up support to implement them on the Bitcoin base layer.

Another effort is Blockstream’s Simplicity, a smart contract language that would implement a ZKP verifier on Bitcoin.

Bitcoin is seen as a sturdy and difficult-to-move giant by some, but the reality is that its “limitations” are a design feature. The Bitcoin network has been running without much hiccup for more than a decade.

Meanwhile, smart contracts, spearheaded by Ethereum’s
ETH
“world computer” developer vision, have cemented themselves as essential for the most interesting blockchain applications. Because of their Turing-completeness, they can be used for anything: decentralized finance, exchanges, creating tokens, trading monkey pictures, bringing real world assets to blockchain, decentralized identity and many more.

In 2023, we’ve seen how Ordinals — an unintended, limited yet mind-boggling feature built on the Bitcoin network supporting both fungible and non-fungible tokens — already caused a minor schism in the community. Trying to add smart contracts outright to Bitcoin would cause a split not unlike the controversial block size wars of 2017.

Instead, multiple projects have focused on building L2 solutions to expand BTC uses outside of the Bitcoin blockchain itself. Lightning is the oldest solution that has gained some adoption (like Twitter tips, or exchange withdrawal options,) but Lightning’s focus on small-scale payments and a significant number of fundamental drawbacks has limited its broader applications.

A number of Bitcoin-centric projects tried to add smart contract capability through sidechains, such as Rootstock and Blockstream’s Federations. The definition of what constitutes a sidechain is, as it turns out, disputed. The Bitcoin wiki says that any blockchain that has a pegged version of Bitcoin is a sidechain — which would apply to Ethereum and countless other chains. Another definition involves using Bitcoin as the fee token, but this doesn’t apply to all Bitcoin Layer-2 chains.

If we were to define sidechains as “spiritually Bitcoin-adjacent” chains, then the list would include Rootstock, a sidechain that is also merge-mined with Bitcoin; Stacks
STX
, which uses its own token for fees but derives its consensus directly from the value of Bitcoin; Rollkit, which uses an Ordinals-like technique to publish L2 data to the Bitcoin network; as well as Blockstream’s Liquid.

But all of these approaches face a fundamental issue: Bitcoin’s lack of Turing-complete smart contracts. Ethereum rollups are designed to be secure because the blockchain itself, through EVM smart contracts, can verify the rollups for validity. This can’t be done on Bitcoin. The problem also extends to secure pegging (or bridging) of Bitcoin: all existing approaches are to some extent based on holding Bitcoin in multisig wallets, each with different tradeoffs between security and capacity.

For example, Blockstream’s Liquid only uses a fairly centralized federation of signers, while Interlay requires users to post an over-collateralized bond for the bridged BTC, which benefits decentralization at the cost of capacity.

These tradeoffs cannot be overcome without at least some kind of change to the Bitcoin base layer. But instead of fully adopting smart contracts, a limited solution to verify L2 systems could do the trick.

A framework based on Zero-Knowledge proofs (ZKP) seems like the most promising approach. The first proposal came from a 2020 paper proposing Zendoo, an implementation-agnostic system for verifying external chains. Inspired by this idea, ZeroSync enables a ZK layer on top of Bitcoin by generating succinct proofs of arbitrary complex statements. This is complemented by Blockstream’s Simplicity, a low-level programming language and machine model with simple semantics with formal proofs.

While both techniques are still in a research stage, ZeroSync and Simplicity, if implemented, could potentially solve Bitcoin networks’ limited space and programmability, and place Bitcoin as the most secure settlement layer for sidechains. This would instantly make the ecosystem as rich and useful as Ethereum, also solving long-term concerns like the security budget. Therefore, zero-knowledge techniques could be the answer to Bitcoin’s massive adoption beyond value storage.

Rollups are a central part of the roadmap for scaling Ethereum, and they’re finally here. As developers continue working on the new paradigm of scalability, the result of their work might completely change blockchain infrastructure — making Ethereum much cheaper to use.

First, why were rollups invented? You may have heard Ethereum described as a “the world computer” by its creator, Vitalik Buterin. It’s the blockchain that first popularized smart contracts, or computer programs running on the blockchain.

These programs can enable fully peer-to-peer financial transactions, exchange of assets, but also to prove ownership of items, store data forever, create decentralized and private identities, and more. The problem is that there isn’t currently enough bandwidth to really go beyond the first two uses.

Ethereum emulates one big, public server that allows making verifiable calculations. The downside is that every single Ethereum node in the world runs the exact same computer program, even nodes run by scrappy enthusiasts at home.

A global network supporting an asset more valuable than Shell or Netflix (according to 8marketcap.com) might be no more powerful than the device you’re reading this on. It’s actually even worse than that in practice, as the additional burden of verifying each calculation makes everything that much slower.

This is where rollups come in. The Ethereum community’s roadmap of scaling the network relies on rollups as an approachable, and extremely effective solution that increases the network’s capacity.

How An Ethereum Rollup Works

The basic principle of a rollup is that it executes the transactions, but it doesn’t need to run its own consensus to verify them.

A rollup is a blockchain that “saves” its data, compressed, to the main Ethereum chain. This is a huge benefit that allows easily creating separate “blockchain instances,” each run by their own node system called Sequencer.

But if the blockchain isn’t re-executed for verification, how can we ensure that the transactions in it are legitimate? If we don’t, someone may commit fraud, for example, minting themselves trillions of ETH.

The technology behind cheaply verifying data is the key insight behind rollups, and it’s the only major difference between the two leading types of them: Optimistic Rollups and zk-Rollups.

The “optimistic” approach is simple: just assume that all data is valid. By itself that sounds ineffective, but these rollups have an ace up their sleeve: fraud proofs.

Whenever a batch of data is submitted, anyone can claim that it’s incorrect. To do so, they must submit a cryptographic fraud proof that leaves no room for doubt, and that can be verified very efficiently.

Optimism
OP
and Arbitrum
ARB
are some live implementations of this tech, collectively holding over $2.7 billion in assets on their chains, or fourth across all blockchains according to DefiLlama. There haven’t been any instances of fraud, yet, even so, the point of the mechanism is to deter anyone from trying to commit it.

Zk-Rollups are less trusting, as each batch of its data comes with a cryptographic zero knowledge proof of its correctness. The proofs offer rock solid mathematical guarantees and are very cheap to verify, and unlike in the optimistic case, the result can be immediately taken as valid. Leading exponents are Starknet, Polygon
MATIC
zkEVM and zkSync, which launched somewhat later but still racked up more than $180 million in value deposited.

The Future Of Rollups

Rollups allows scaling by offloading the cost of execution and verification off-chain. However, data is still stored on the main Ethereum chain. In this sense Ethereum acts as the data availability layer for rollups. But Ethereum has very limited blockspace, and indeed many are trying to implement more performant solutions.

This is what projects like Eigenlayer and Celestia are working on right now, focusing on providing the best data availability and consensus layer for other networks. The idea is that by stripping down all the unnecessary elements of the Ethereum blockchain, there will be more space for rollup-based modules.

There is a “trilemma” in blockchain involving decentralization, scalability and security, and so far networks have been forced to choose at most two of these. With rollup, application-specific chains and data availability solutions maturing, perhaps the trilemma might become a thing of the past.