3 Challenges for Ethereum Scaling Solutions

3 Challenges for Ethereum Scaling Solutions

Key facts:
  • Resources such as rollups reduce commissions, but still have certain limitations.

  • Sidechains propose to solve the same problems and compete with these tools.

Second layer scalability solutions (layer 2 or L2) are considered the best tool for Ethereum to reach more users while being fully functional. However, a report highlights that they still have to face some challenges, such as certain user experience complications, lack of interoperability with each other, and competition with other sidechains.

According to the report Layer 2 Scalability Solutions: A Framework for Comparison, Posted by TheBlockthese types of tools pose some difficulties for users compared to those operating in the main layer (layer 1 or L1) of Ethereum.

Among these challenges, the first ones have to do with the user experience when using them. The first thing that stands out is the delays for withdrawals in the case of rollups of type optimistic and ZK (Zero-Knowledge or “zero knowledge”). The rollups they are, precisely, a scalability solution that “rolls” transactions in a second layer and then brings them all together to the main layer of Ethereum.

Although they allow to operate with lower commission costs, the main obstacle of rollups is delays in withdrawing funds from them, says the report. Also, “they often demand multiple transactions from users.”

3 Challenges for Ethereum Scaling Solutions
Fees using rollups are much lower than on the Ethereum mainnet. Source: l2fees.info

Secondly, several second layer solutions demand the use of bridges to deposit crypto assets in them and thus be able to operate. Currently, as CriptoNoticias has reported, some cryptocurrency exchanges have begun to offer direct withdrawals without the need to use bridges, which not only takes time, but can also mean extra expense.

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Other Challenges for Ethereum Second Layer Scaling Solutions

The second type of problem highlighted in the report is the inability to interact with each other. In Ethereum, this is equivalent to any user being able to develop new products and services based on existing ones.

This interoperability, it is explained, could allow users to “transact between applications in the same security framework, in a chain and several times in a single block.” For now, operating between different L1 and L2 solutions is “difficult for users in the short and medium term”.

The example cited in the text is that of Uniswap, which supports four networks: the Ethereum main layer, Polygon, and the Arbitrum and Optimism rollups. This has the advantage of reducing commissions when operating, but since they are not interrelated, it can fragment the user’s liquidity and thus complicate their operations.

Finally, the third hurdle for L2 scalability solutions on Ethereum is competition with other networks and sidechains (sidechains) of the L1. In this sense, it is argued that the reduction of commissions due to less activity on the network during bear markets can lead to fewer users migrating to L2.

For example, there are competing networks of Ethereum such as Solana and Avalanche that develop products in their own ecosystems trying to solve some limitations of the main layer of this network. To do this, they appeal to faster or cheaper transactions, among other features.

graph shows increase in the amount of investment in ethereum second layer solutions between 2021 and 2022
Investments in L2 scalability solutions grew in 2022 over previous years. Font: The Block.

Second layer scaling solutions are shaping up to be the future of Ethereum

Beyond everything mentioned, these Ethereum L2 solutions seem to be the “candidates” to allow the scalability of the network in the future. This is what one of the co-creators of Ethereum, Vitalik Buterin, thinks, as CriptoNoticias has reported.

In the aforementioned report, other factors that may contribute to its growth and adoption are detailed, among which new incentive programs and token launches stand out, as well as the “continuous investments and improvements” in second layer technologies by the entities that develop them.

As you can see in the image above, funding for developers of Ethereum L2 scalability solutions has grown in 2022 compared to the previous year. Record figures were reached in both, and this speaks of the work that is being done in this area to achieve greater efficiency as more users join Ethereum.

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