I decided to write this article firstly because I became curious about the difference between Layer 2 networks and how Ethereum works in general and secondly because apart from the guides on how to make money with Airdrops I am also interested in learning you something new.
Of course I admit that in some places I may have understood something wrong or didn't explain it clearly enough so the chat is always open, where we can discuss it with you. Enjoy reading everyone!
The blockchain thrillema Ethereum wants to solve is achieving scalability, decentralization and security.
On September 15, 2022 Ethereum switched completely to Proof of Stake with Proof of Work. What has changed after this transition - instead of miners, validators are now processing transactions and creating blocks.
This was made for several reasons such as: security (harder to attack the network), lower power consumption (even more likely eliminating it completely) and scalability. The upgrade itself was the very first step towards scalability, in theory it will allow the implementation of such technology as sharding in the Ethereum network. In simple terms, sharding divides the network into several smaller networks, each of which is responsible for certain things.
Why is scalability a problem at all?
We personally felt it for ourselves during the shitcoin season, the gas for a regular transfer could easily be $10, it's scary to imagine what will happen to the gas if the ETH suddenly starts to be used by tens of millions of people. The reason the gas is so big is the ether technology itself. A validator has a maximum of 12 seconds to create a single block. The number of transactions per block is limited to 30 million gas units, a typical ETH transfer spends 21k, and the average gas in a block is 15 million.
How are transactions created and processed in Ethereum?
Validators are responsible for this, either creating or validating blocks. There are certain calculations that take time to do this. When there is a heavy load on the network - gas goes up as users pay to have their transaction prioritized over others and get into the nearest block/blocks while the speed of transaction processing and block creation does not increase. It's also worth noting that the more complex the transaction in terms of smart contract interactions, the more expensive it is because it's harder to validate. Therefore, it takes more gas to execute it and in terms of the amount of gas (gwei) itself, it competes with all the other transactions trying to get into the block.
Optimistic and zk Roll-ups, what is the difference between Arbitrum and Optimism.
Generally, the idea of roll-ups is that transactions are created outside of ETH Mainnet(off-chain) but then compressed into one large transaction and written to ETH Mainnet in one transaction thereby using the security of ETH when a transaction is written. That is, all users are allocated a commission from one transaction in Mainnet hence such cheap gas in Arbitrum and Optimism.
Both Arbitrum and Optimism use Optimistic roll-ups, what is the difference?
Optimistic roll-ups use such tool as fraud-proofs which helps to understand if everything is ok with Layer 2 network transactions via ETH Mainnet, their main problem is that it takes too much time to confirm them (remember what you were waiting a week for when you withdraw ETH from Optimism or Arbitrum?). Bridges like Orbiter solve this problem with extra liquidity.
The main difference between Arbitrum and Optimism is that Arbitrum has more bandwidth because using the fraud-proof tool only works with the suspicious portion of transactions checked in Mainnet, but at the same time it can take longer. Optimism, on the other hand, checks the entire transaction, it may be faster but at the same time it becomes more expensive. Also Arbitrum has its own Virtual-Machine, while Optimism uses EVM.
There's not much difference between them, but what's the main difference from zk?
Zero-knowledge transactions that go through Mainnet's ETH include a cryptographic zk-Snark string which Mainnet confirms and zk-failed transactions will be immediately rejected by Mainnet. The zk transactions themselves are also bundled together.
Also zk allows transactions to be more anonymous, validate them without revealing their data and increase transaction speed. The main difference between the two roll-ups is essentially that zk allows you not to wait a week for withdrawals from zk protocols and it solves the problem of possible liquidity shortages that can happen with bridges like Orbiter.
Now zk roll-ups are already getting a lot of money - Starknet has raised 275 million and the company that makes it is valued at 8 billion, zkSync has raised 450 million but they are still at an early stage of development, as we can see by the large commissions(StarkNet is also very slow). Starknet promises new update in Q3, zksync is still developing too. A lot depends on Ethereum itself and their updates, so we just have to wait and jump into these ecosystems, benefit together because if Vitalik sees the meaning and solution of Ether problems in them, we should at least listen to him, and the potential behind the technology is really huge.
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