Rollup Wars

Transcript

foreign [Music] I'm the founder of rhino5 which is an all-in-one platform for D5 and I'm going to be speaking about roll-up Wars L2 Wars and the battle that's coming between all the different scaling Solutions in the ethereum space so I'm going to start off talking a bit about the history of how we got to this position where there are so many different competing scaling Solutions then I'm going to do a bit of a Roundup of the roll-up ecosystem and how it looks today and then talk about what tools different Roll-Ups and competing scaling Solutions have uh to sort of battle each other in the next few years

and then what an eventual vision for peace could look like for the ethereum space so to start off um how did we get to where we are now and we've seen over the last year or two this complete explosion in terms of especially evm Roll-Ups but also other types of roll-ups um but in the beginning there was just ethereum and everyone was very happy we got smart contracts composability and D5 started to emerge on ethereum but that came that brought with it some new challenges we saw congestion high gas prices slow block times and so this initial Vision was that everything would be really simple we would just create

layer twos on ethereum and people would be able to migrate up there um do many of their transactions and come back to ethereum layer one when they needed to and these are some of the early um layer two solutions that we talked about there weren't that many um and uh Diversified was actually rhino-fired before we rebranded um but in reality what we've seen today looks much more complex and we have not just layer twos but we also have layer ones which are also evm compatible we have layer 3 is now coming um and all of these different Roll-Ups chains connect together via a complex set of uh Bridges with different trust

assumptions and so for users this is a really confusing complicated situation it's getting harder and harder to navigate harder and harder to know what trust assumptions are being made in the different applications that you're using and so we need to figure out how to get out of this situation and how we solve it but that's just the beginning over the next two years we're going to see thousands more Roll-Ups launch um and so far we've only really just scratched the surface it's getting easier and easier to launch a roll up uh and 95 of them will likely never reach sustainable usage and will end up dying out so we're going to see during that period a really brutal technological race a competition for attention and also a

price for potentially over fees which might be good for users so where are we today what's the current state of the roll-up ecosystem and first before I go into that I want to just talk about the kind of business model of an L2 um so an L2 is a two-sided Market you need to attract Builders and liquidity to come and create something on this uh sort of roll up or layer two and then that will hopefully lead to attracting end users to also come there if that's successful in building that ecosystem which is already sort of a big question mark um you can charge transaction fees to the users of that ecosystem um and the basic sense you the roll-up is then paying the L1 for security in return and as long as the fees that you

charge to your end users are less than the security costs you're paying to the L1 um you're happy because you're basically profitable as a roll-up and you're sustainable um and so we can see that today in some of the the Roll-Ups that exist so for example arbitrim um is already making very high sort of annualized Revenue on the transaction fees which is much higher than the the security cost that they're paying to ethereum and they're able to currently take an average of 30 to 40 profit margin and today these are centralized sequences on all roll ups so that's kind of going to the Dow or to the teams um in future that might be some sort of decentralized sequencer network but still essentially the same the same sort of business model applies

optimism is is in a similar position today now charging much more transaction fees um than they're paying to to ethereum that's not the case for for all roll ups yet So based on that there are certain levers that each roll-up has to determine if they're going to be success um first of all can you attract that ecosystem of Builders it's very difficult to do can you then attract end users um what fees are you able to charge to users for for using the roll up um and then what costs do you need to pay back to L1 for security and all these things are going to be affected by competitive Dynamics between the different Roll-Ups and there's going to be a push on many of them um based on competition

and so now let's go on to kind of the market share and statistics today so looking over the last few years we really on the ground on the big picture haven't seen yet uh any of the the Roll-Ups or evm chains take a big share from ethereum we've definitely seen it start to happen but we are still very early um and that's clear when we look at look into the data and it's similar when you look at tvl um so although there's there's growth happening and you can see for example significant growth on some chains like some Roll-Ups like arbitrim overall these are still very small compared to ethereum's dominance and so we haven't reached that kind of critical mass yet of people switching over to use mainly Roll-Ups or ol2s um but if we sort of look just today we

can see now some traction starting to happen on on the top roll ups so for example in tvl um we've got some clear winners at the moment arbitrim optimism and ZK sync era um with others sort of mainly lagging behind but starting to gain some dominance um in terms of tvl and it's very similar in terms of transactions per second there are other Roll-Ups which definitely are starting to really get traction now so if we look at Stark net and particularly seeing following the recent upgrade they've had a big tick up in tvl and studied steady growth before that and so starting to um really come into that um that tier uh similar polygons UK VM sort of trending up very strongly and

the very recent launch of linear um only now 24 hours in but growing quickly um but this is still very early again we've got hundreds more Roll-Ups still to launch so base very soon by coinbase and Tycho scroll and Stark net continuing to kind of add many many upgrades um and on top of that it's getting even easier to launch blockchains because of things like um sort of modular blockchain tooling such as the espresso shared sequencer and Celestia wool kit and just to mention that one for a moment um so Celestia is um basically a data availability Network making it but they have it they have something called roll kit which by their own description is basically aiming to

make it possible to deploy a sovereign roll up uh in minutes so it's going to get so easy over the next year or two as this technology becomes um uh easier and easier to use that we will really be able to see anyone launching a roll up for anything they want to use it for so given that context that we're going to see even more and more of these chains what what are the tools that they have in order to compete and differentiate themselves uh and the first that's very strongly important to users is is clearly cost um and I think today we're seeing already a lot of competition happen on cost uh for uh attracting D5 users and people to come and even Explore many of

these newer roll ups um this is data from actually just yesterday but it's pretty representative of how things look across these different networks and what we see at the moment is that the custom ZK Roll-Ups is slightly higher uh around the kind of 30 Cent Mark uh whereas optimistic Roll-Ups tend to be a little bit cheaper um and that uh other sort of evm chains are even cheaper but maybe have uh not the same sort of uh L2 trust assumptions and bridges but um over the long term those those cost factors look different so ZK Roll-Ups um are currently more expensive but they have an advantage at larger scale so uh we should see transaction costs on those

continue to reduce as they get more traction uh making them long term actually very competitive and maybe better in terms of cost than the optimistic rollups um all roll ups are going to benefit from eip4844 and put your dance shot dank shocking which will reduce costs significantly and maybe even get to get us to the point where for the moment this doesn't become such a factor in competition um and there's also choices that you can make between for example fully on chain data availability validium or using other data availability services like Celestia so if cost is becoming less important as the ecosystem continues to mature community on the other hand is clearly the the kind of biggest area that I

think is the hardest to compete on and where Roll-Ups are really focusing at the moment and we've seen some good examples um around launches of chains like optimism and ZK sync um where having you you can do many things with grants building a strong culture and Community a very recognizable brand and working on decentralized governance um and ecosystem growth and the tools available for these often have been related to token economics I think it would be uh I mean we have to mention the fact that airdrop hunting has become like one of the big factors uh in early adoption of many Roll-Ups uh been and for small adoption and active addresses has been like the biggest driving factor from the data

um but longer term bigger scale at economic incentives um using the token for for growth or um helping build a kind of sustainable deeper ecosystem that can then grow sustainably uh has been very important and we can see that happening for example in arbitrim um so that's kind of now but I think longer term interoperability becomes uh equally important so finality is one of the primary limiting factors for being able to have good interoperability um and shorter finality times basically enable faster bridging and faster interoperability um so ZK Roll-Ups theoretically can have shorted finality than optimistic rollups

but the lines are becoming very blurred uh with things like committees providing soft finality or Hybrid models on different roll apps and we also have Concepts like light chains similar to IBC uh for optimistic rollups for example like polymer um but if we look at data today the number of fast and low-cost bridging options has correlates very strongly with the growth in user activity across rollups and UVM chains um and in this context quality does matter more than quantity of bridges but a very loose metric is that we can see basically the level of adoption correlating with the number of uh Bridge options so let's dive into that a bit more and talk about the most recent theme that

we've had mentioned of super chains hype and Hyper chains um so optimism for example has announced that they're really focusing now on the super chain um so what does that mean exactly uh basically it's a concept that in the optimism ecosystem um we're going to have many different op chains built on the op stack and they're all going to be linked by a cross-chain messaging protocol so that's going to give many advantages potentially to chains that are in that ecosystem um but basically it means they can have shared ordering of transactions shared security but really importantly shared communication communication protocol between all these op chains it's going to take some time to get

there this isn't something that happens overnight but that vision is very interesting as it means that all these chains have a basically free and instant low trust communication protocol and that concept isn't completely new uh if we look for example at Cosmos and polka dot you can see a lot of parallels between this super chain concept for Roll-Ups um and this was something that's been sort of evolving outside of the ethereum ecosystem and test it out for for many years and importantly Cosmos IBC really has a lot of parallels to that question messaging protocol and that's not the only team that's sort of linking to that Vision in the ethereum roll-up space so polygon has also announced polygon 2.0 uh with unlimited scalability unified liquidity

and really when you look in that that's the same concept of this cross-chain communication protocol and similarly ZK sync have also announced hyper chains and uh using the ZK stack with a cross chain communication protocol so we're seeing this kind of unified vision of a network of Roll-Ups connected by a completely low trust uh Native protocol sort of evolve simultaneously across all these different um different roll-up Technologies so where can that lead us in terms of the future of this ecosystem one option and many and some people do think this is what's going to happen would be that we get to the single Survivor one massive roll-up that gets so much adoption that there's no point anyone else building there uh becomes so

cheap because uh you're able to get the kind of economies of scale of having all transactions on this one roll up um and I think actually that's not something we necessarily want although it may seem that sound appealing we saw back when we think about the business model that we want competition between Roll-Ups it brings down cost it brings other benefits for users and also I think it's unrealistic what we've seen happen in the layer one space has not been one single chain have full dominance it's been this constant iteration and evolution and competition which is good for decentralization so the alternative would be that we want to have many many different Roll-Ups which are already starting to evolve uh living together but with a really low risk protocol level interoperability between all of them so that from a user

point of view uh they can sort of almost be agnostic of these different um different chains and benefit from all the trade the trade-offs that they're each making so users are going to be infrastructure agnostic they won't necessarily care eventually which L2 or chain they're on as long as the app that they're using works and the L2 space becomes a commodity to users really as long as they can quickly move between the different chains but it will matter to apps who want to trade off different aspects of security sovereignty and uh and cost um so that brings us to kind of rhino Phi and what we're building um we're trying to make a user aggregator layer across all these

different Roll-Ups we currently support uh eight different Roll-Ups and you can basically explore D5 and all of them move between them quickly using uh Bridge Tech Bridges uh and swapping and and yield uh and that's sort of um really where we've been focusing is this interoperability aspect to make it feel like one seamless Network rather than eight different Roll-Ups um we use at the core stockx and then also support uh seven other uh Roll-Ups um and I've had over 500 000 transactions for example between these different chains um so final takeaways I wanted to just go go to was um many of these ecosystems are converging onto the same a very

similar idea of what um interoperable blockchain networks will look like um and many of them are underpinned by a similar idea to like IBC from Cosmos out of this kind of protocol level Bridge rather than the smart contract Bridge um and that sort of protocol level communication layer may make smart contract bridging sort of obsolete in many ways um so I recommend if you want to have a sense of what this could end up feeling like for the overall ecosystem do try out uh Rhino Phi uh we just launched a bridge to linear uh which went live yesterday um and it's free at the moment to try out uh with no no bridging fees at all and we've already had I think ten thousand uh transactions since yesterday

uh but yeah thank you very much and I hope you share my vision for what Roblox could end up looking like for our ecosystem [Applause] does someone have questions thanks will I was just wondering if you comment on how you think about Bridge Security in this like context of what you're building yeah so I think um Bridge security at the moment uh I think is very limited and although there

are I mean most of the bridges that we're using uh across the ethereum ecosystem are uh like smart contract protocol Bridges requiring collateral in them um I think that those are a temporary solution um and that what we need to be moving to is something that looks much more like like plant bridging similar to IBC and so I think that's where many of these uh things like super chain hyper chain with intercommunication protocols will end up replacing basically smart contract bridging but basically I think at the moment the yeah I think really the security trade-offs are being made are unacceptable and we see that through the number of hacks that are happening but there isn't much alternative yet

uh last questions hello I'm using Arena Finance can you explain when you deposit uh some token at the protocol level and you want to invest it on some how it works with the fees I didn't understand that so um so run if I offers various uh yield opportunities across many different chains um and actually when you're holding your funds they're on uh Stark X roll up it's based on the stock quote technology and you're essentially trading for the token uh of some yield opportunity so it might

be for example State teeth that you buy with eth um at the moment there's basically no fee except when you then exit that opportunity so you you but you basically get your steak teeth and then when you would want to go back to eth you pay an exit fee which is worth usually about two days of um between two to five days of uh yield uh so that's you know how the fees work foreign thank you for the talk and [Music]