Why are Layer 2s a superior solution vs low-fee alt-L1s? In order to understand this, we must abstract what a blockchain actually is from a macro level.
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While Bitcoin pioneered the blockchain for currency, it is clear they can do much more, and the rise of smart contracts proves this. Modern blockchains now provide a service: secure, decentralized data publishing and distribution.
Fees are dynamic according to how much users want to pay to add/change data at any given time.
Saying "ETH's fees are too high, nobody will use it!" is equivalent to saying "Too many people are driving on the highway, nobody will use it!"
Saying "ETH's fees are too high, nobody will use it!" is equivalent to saying "Too many people are driving on the highway, nobody will use it!"
The fact that fees remain high is proof that a blockchain's service capabilities are less than demand.
Low-fee L1s are filling the niche of priced out users who are willing to sacrifice decentralization for lower fees.
Low-fee L1s are filling the niche of priced out users who are willing to sacrifice decentralization for lower fees.
While Ethereum could drop fees overnight with a simple gas limit change, the scalability trilemma remains an issue. A great article about that is here: vitalik.ca/general/2021/0โฆ
Taking into account the scalability trilemma, how does a blockchain stay secure and also scale with low fees?
Modularization. It is impossible to increase node requirements infinitely (as it reduces decentralization), but you can separate the execution from the consensus.
Modularization. It is impossible to increase node requirements infinitely (as it reduces decentralization), but you can separate the execution from the consensus.
Separating these parts makes sure consensus has low hardware requirements, allowing maximum participation and decentralization, while allowing more throughput for execution.
This is exactly what a Layer 2 does. The only thing a L1 needs to do is publish secure data, but can only store so much of it while remaining decentralized. A L2 compresses the execution outcomes off-chain and then publishes it on-chain, like a .zip file.
There are many ways to do this, like ZK proofs, optimistic rollups, etc, but the basic principle remains the same. The L2 is outsourcing the execution and putting it back on the chain while keeping it secure the whole time.
More threads coming soon.
More threads coming soon.
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