The contents of this article was first featured in a Twitter Thread dated January 31, 2023.

Everyone knows by now the future of scaling on Ethereum is rollup-centric, but why focus on roll-ups and not alternate L1s for scalability?

The Answer: Seamless and More Secure Interoperability.

Interoperability isn't just between protocols on a network, but between protocols on different networks! We're already seeing many DeFi protocols talking about cross-chain liquidity where users can access pooled liquidity across all chains. (ex. DEXs and lending markets)

The problem with existing bridges is the lock and mint function that has been the root of so many hacks. The problem is that often times, the chain of which the assets are being bridged to only holds bridge-wrapped assets. This can lead to entire DeFi ecosystems crumbling in minutes if a bridge hack were to occur.

This happened to Evmos and Moonbeam after the Nomad Bridge hack. Thankfully, there are many amazing teams building great solutions (ex. Axelar and Layer Zero) to mitigate these issues.

Rollups allow for entities with different intentions to build their own custom environments. Why does this matter? Because for crypto to reach mass adoption from a wide array of users, the ability to build sandbox environments will be crucial.

Like it or not, as more regulation comes to the space and larger players become eager to take part, privacy-enabled transactions AND KYC compliance will be critical, and large institutions will want to build their own custom environments to operate in. The beauty of cryptocurrencies is the ease of flow of assets between protocols and the ability to easily transfer digital ownership between people and platforms.

As more rollups are built on top of one underlying network, the richer the ecosystem gets. For example, instead of recreating the same asset on several networks, an asset is minted on Ethereum Mainnet and transferred to different rollups that have their own parameters (to comply with certain regulations for ex.), every rollup manager will not have the burden of having- -to create their own assets.

This allows builders to grow their ecosystem by focusing on the tools that are unique to their sandbox instead of having to recreate things that have already been done. In other words, leveraging things that have already been proven successful!

Rollup Interoperability

Because rollups will be using many of the same assets that originate from Ethereum Mainnet, rollups will have much better interoperability between each other as protocols will be able to share commonalities with each other. Think further than just DeFi protocols sharing liquidity. NFTs, digital identities and many other cool web3 functionalities will benefit from these shared commonalities as well! It would be like many countries with their own rules speaking the same language.

Builders will be able to construct environments with the specific parameters without forcing the users to commit to their walled gardens. Users will be able to move their assets between rollups, choosing to opt-in on certain tradeoffs, but can leave whenever they'd like. It's important to note that regardless of how strongly held your convictions are, one should explore the alternatives and understand what others are building in the space. This is why I want to highlight other non-rollup attempts to solve these issues.

Other Alternatives

A conversation about interoperability would not be complete without mentioning the Cosmos ecosystem. Even though this thread is Ethereum-centric, lots of great work is being done by other L1 ecosystems to further the vision. Take a look at this awesome thread by Emperor Osmo

Avalanche’s vision with their subnets looks similar to the scenario described above. They've made large advancements and investments in this thesis with their partnership with AWS.

Final Thoughts

No one really knows where we're headed with regards to mass adoption of digital assets, but I hope that this thread has given you some perspective on how rollups on Ethereum can lead to the next wave of adoption in the space! (s/o @pseudotheos)