CTO of Paradigm, Georgios Konstantopoulos, and founder of Conduit, Andrew Huang, discuss the state of Ethereum Layer 2s. They cover topics such as the strengths and obstacles of L2, the evolution of superchains, universal composability, benefits of staying in the ecosystem, and the importance of compatibility and customization in blockchain networks. They also explore the business perspective of rollups, the advantages and challenges of Ethereum Layer 2 solutions, and the collaboration, security, and customization aspects of these solutions.
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Quick takeaways
Ethereum Layer 2 roll-ups are experiencing significant growth with a total value locked of almost 20 billion, showcasing the increasing adoption and scalability potential of Layer 2 solutions.
Efforts are being made to address key challenges in the Layer 2 space, including enhancing security through multiple fault-proofs and exploring alternative sequencing solutions to improve decentralization.
Joining a superchain ecosystem offers benefits such as simplified deployment processes, enhanced composability, and compatibility with existing tooling, fostering trust, standardization, and an expansive network.
Deep dives
The growth of Ethereum's Layer 2 roll-ups in 2024
Ethereum's Layer 2 roll-ups are experiencing significant growth, with the total value locked in layer twos reaching almost 20 billion. The security of roll-ups is improving, with the deployment of more fraud proofs and the introduction of security councils. The ecosystem is becoming more decentralized, and there are over 20 live roll-ups offering various types of solutions. Companies like Espresso and Conduit are building infrastructure to support the deployment of more roll-ups. While progress has been made, there is still work to be done, such as achieving true decentralization and enhancing tooling support. The future looks promising as Ethereum enters a pivotal point in scaling its ecosystem.
Challenges and research focus in the Layer 2 space
In the Layer 2 space, security and decentralization remain key challenges. Efforts are being made to enhance security by implementing multiple fault-proofs and limiting the power of security councils. Decentralization is being addressed by exploring alternative sequencing solutions to reduce reliance on singular sequencers. Another area of focus is improving tooling support to adapt to the evolving Layer 2 ecosystem. While progress has been made, researchers continue to explore solutions for conditional execution and universal composability. These challenges demonstrate the ongoing commitment to improving the Layer 2 space.
The benefits of joining a superchain ecosystem
Joining a superchain ecosystem offers several benefits. Infrastructure providers can enjoy managed services, including upgrades, governance, and support, which simplifies the deployment process. Users benefit from enhanced composability within the ecosystem, as well as the convenience of using a single endpoint for interactions. Compatibility with existing tooling, such as block explorers, further streamlines development and user experience. Being a part of a broader ecosystem fosters trust and standardization, ensuring users can confidently engage with the chain while enjoying the advantages of a compatible and expansive network.
The future of rollups and App-specific chains
The use of cheaper data availability solutions like Celestia is driving down the costs of rollups, enabling more App-specific chains to justify their existence. The reduced costs make it economically viable for startups to experiment and launch rollups for niche use cases. Cheaper data availability removes a significant barrier and empowers developers to create on-chain applications with ease. As infrastructure costs decrease and more users engage in transactions, we are likely to witness a proliferation of App-specific rollups, fostering innovation and expanding the Ethereum ecosystem.
Lowering Costs of Rollups: From Challenges to Solutions
In the podcast episode, the speaker discusses the trend of lowering costs for rollups. A year ago, when Conduit started, the environment was challenging with no documentation, a changing code base, and unready software. However, this allowed Conduit to gain expertise in the stacks they use and build production-ready deployments. For example, they developed Conduit Elector, which enables zero-downtime upgrades on chains, providing users with a seamless experience. This solution also allows for automatic failover in case of hardware failure. By solving these early challenges, Conduit has developed a best-in-class solution, enhancing chain reliability and gaining insights into shared sequencing's future.
The Business Model of Rollup as a Service (RaaS)
The podcast also delves into the business model of RaaS and how RaaS providers generate revenue. Typically, RaaS business models involve infrastructure and hosting fees, encompassing tasks such as running sequencers, scaling nodes, and ensuring production readiness. Conduit mainly uses a software-as-a-service (SaaS) model for these infrastructure and hosting fees, aiming to reduce costs over time and offer scaling capabilities to accommodate volume. Additionally, sequencer fees contribute to revenue, with sequencers selling L2 gas and buying L1 gas. RaaS providers like Conduit may take a small percentage of sequencer revenue, while rollup frameworks like optimism or arbitrum may also claim a percentage. The revenue generation depends on the individual customer and the specific dynamics of each network.
We're thrilled to be joined today by Paradigm CTO, Georgios Konstantopoulos and founder of Conduit, Andrew Huang who are on the show today to deliver a masterclass on the state of Ethereum Layer 2s, how they're going, and where they're headed.
There's nobody better to take us through this technical and very educational episode on the state of L2s.
00:00:00 Intro 00:05:59 L2 Vibes, How Are We Doing? 00:08:43 L2 Obstacles 00:11:47 Building Conduit 00:14:19 Strengths of L2 00:17:30 Few Rollups or Many Rollups? 00:21:29 Market Demands 00:24:47 The Evolution Of Superchains 00:30:47 Shared Sequencing 00:34:02 Universal Composability 00:35:57 Evolution and Benefits 00:38:35 Unionized vs Independant L2s 00:45:42 Benefits Of Staying in The Ecosystem 00:50:05 The Modular Conversation 00:52:02 Cheaper DA 00:56:13 RAAS Business Model 01:01:26 Scaling Out The Business Model 01:04:23 L2 Security 01:11:27 Modification 01:16:15 Dealing with Growth 01:17:56 What Comes Next 01:20:01 RETH
