Thread by @chriscantino

L2 rollups explained like you’re five—and why you should care about them. 🧵

Rollups are some of the most important technologies to watch in web3.

They promise fundamental upgrades to the Ethereum user experience, and have major market implications.

Let’s learn about how they work and what's coming next.

A “rollup” is a way to process blockchain transactions faster and more cheaply—for a fraction of Ethereum’s usual gas fees.

Basically, it accomplishes this by recording the computation of most transactions off-chain.

Usually, a massive number of computations are stored on-chain, and it is costly to verify them. In a rollup, those requirements are reduced to a fraction.

The network assumes that if the transactions it checks match up, that those stored offline will also match.

Major unlock.

TLDR: In a rollup transaction, you are essentially compromising on-chain storage for more efficient transaction fees.

More good news: transactions still maintain the security benefits of the ETH blockchain.

So far, the ecosystem has responded positively.

The rise of rollups has major implications for the markets. If they continue to gain adoption—and many macro trends point to this—the market value of the rollup ecosystem will go up significantly.

Rollups = Alpha

Important

Part of ETH’s roadmap is “The Surge”: a series of upgrades offering scalability for rollups through ”sharding.”

Sharding breaks up large datasets into many small sets to process more transactions, faster.

It means ETH will scale the speed + affordability of rollups.

It’s also helpful to understand that rollups happen “on top” of ETH.

ETH is referred to as an L1 (layer one)—this is the underlying blockchain that settles transactions.

To complete a rollup, our L1 needs help from L2 (layer two) scaling solutions—like Arbitrum or Immutable X.

Here are some of the major solution providers.

zkSync
Loopring
Starknet
Hermez
Aztec
Arbitrum
Immutable X
Polygon
& many others

Innovation here is happening at a breakneck pace, and adoption has rocketed over the past year.

If you want to get ahead of what’s next, I suggest diving deeper into the rollup ecosystem. It's sure to be a hot topic in 2022.

To learn more about L2s, rollups, and sharding—hear from @VitalikButerin himself.

An Incomplete Guide to Rollups: vitalik.ca/general/2021/0…

“Endgame” on @BanklessHQ:

Thx for reading. For more tweets on L2s, NFTs, and web3 in general, follow along @chriscantino.

And please, share your insights in the comments!