The Evolution of Ethereum: Unlimited Potential of Layer 2 Expansion and One-Click Multi-Chain

TLDR:

• Due to the lack of unified standards, different blockchains have different architectures and consensus mechanisms, making cross-chain asset transfers complex and costly. Existing third-party bridges face trust and security challenges, and centralized bridges need to maintain liquidity and pass on costs to users. One-click chain launch is similar to solving the trilemma and is a compromise solution for asset bridging.

• The market maturity is led by OP Stack and Superchain, and Base is a successful example. AggLayer is natively compatible with Ethereum and is more easily accepted, but the aggregation process needs to be safe and reliable. The success of Elastic Chain depends on the development of ZKSync. OP is optimistic in the short term and ZK is optimistic in the long term.

• In the context of insufficient industry innovation, DeFi is still the main application scenario of Rollups. At present, DePIN, RWA and large GameFi projects are less likely to appear on Rollups, while SocialFi and NFT markets may appear, but the market heat is still uncertain. The blockchain as a whole presents a Matthew effect, and the trend of unlimited issuance of Rollups is worth paying attention to in the long term and the middle and lower levels in the short term.

1. Connecting island chains: the bridge problem

When transferring assets across chains, each blockchain has a unique architecture, consensus mechanism, state proof, and state transition, lacking unified standards and interoperability, resulting in complex cross-chain communication and data exchange. These verification processes are often too expensive to be performed on-chain. This limitation has led to a surge in multi-signature committees to verify the status of other chains. As a result, there is no universal decentralized standard or protocol that can achieve interoperability between all blockchains, limiting the free flow of assets between different blockchains.

In order to achieve cross-chain asset transfer, many third-party bridges have emerged, but these bridges face significant network security challenges related to trust issues. Even if centralized bridges can ensure complete security, they still need to maintain sufficient liquidity on each integrated chain, thereby passing these operating costs on to users. At present, the inability to meet the trust difficulty of native decentralized asset bridging and third-party bridges has led ZKsync, Polygon, and Optimism to launch more native solutions such as Elastic Chain, AggLayer, and Superchain Explainer to achieve localized multi-chain expansion.

2. ZKsync3.0: Elastic Chain

Image source: zksync.mirror

In 2023, Matter Labs, the main development company behind ZKsync, released ZK Stack, a toolkit that allows developers to build their own blockchains based on ZKsync technology. Essentially, these custom chains will be interconnected through Elastic Chain, transforming ZKsync 3.0 from a single Ethereum L2 to Elastic Chain.

The ZKsync 3.0 protocol core upgrade was released on June 7, 2024 and is the most complex upgrade of ZKsync to date. It reconfigures the ZKsync L1 bridge as a shared router contract to support the growing network of interoperable ZK chains. The ZK Stack framework enables native, trustless, low-cost interoperability between chains.

Matter Labs said, “Elastic Chain is an infinitely scalable network composed of ZK Chains (rollups, validiums, and volitions), which is secured by mathematical verification methods and enables seamless interoperability under a unified and intuitive user experience. It aims to make interoperability within the ZKsync ecosystem smoother and more efficient.”

2.1 Elastic Chain Architecture

Elastic Chain does not rely entirely on ZK technology, nor can it simply add ZK proof "patches" to other non-ZK multi-chain systems. In general, its network is implemented through three components: ZK Router, ZK Gateway, and ZK Chains.

1. ZK Router:

• Core routing mechanism: ZK Router is the main routing component of the ZKSync 3.0 architecture, responsible for managing and coordinating communication and data transmission between different chains and nodes in the network.

• Cross-chain communication: Using efficient cross-chain communication protocols, ZK Router ensures fast and secure data transmission between different chains, enhancing the interoperability and performance of the overall network.

2. ZK Gateway:

• Entry and exit nodes: ZK Gateway serves as the entry and exit node of the ZKSync 3.0 network, handling the interaction between external blockchains (such as the Ethereum mainnet) and the ZKSync network.

• Asset bridging: Responsible for bridging and transferring assets between external blockchains and the ZKSync network, ensuring the safe and efficient flow of assets between different chains.

• Transaction aggregation: Aggregate user transactions into batches, then generate zero-knowledge proofs and submit them to external blockchains for verification, reducing on-chain data load and transaction fees.

• Middleware: It can be understood as the middleware deployed between Ethereum and ZK Chains to achieve comprehensive interoperability between ZK Chains.

3. ZK Chains: Ensure the validity and security of transactions by generating and verifying zero-knowledge proofs, and submit the results to ZK Router for Rollup and coordination. They are interconnected with L1 smart contracts through ZK Gateway, are completely independent, customizable, and built using ZK Stack.

According to ZKsync, Gateway is a key component of Elastic Chain, which enables seamless settlement from ZK Chains to Ethereum. Submitting proofs and data to Ethereum through Gateway can achieve the following advantages:

• Cross-batch and cross-chain proof synthesis: reducing L1 verification costs.

• State delta compression: compresses small batches of data sent to the gateway and efficiently forwards them in larger batches to L1.

• Faster finality: Validate chain proofs and prevent conflicts with low-latency cross-chain bridging, enhanced by a large number of validators’ stakes. ZK chains do not need to trust other chains.

• Liveness: The liveness of each ZK chain is managed independently by its validators; the gateway does not affect its liveness. Chains can leave the gateway freely.

• Censorship resistance: Cross-chain mandatory transactions will be cheaper than regular L1 censorship-resistant transactions, making them more accessible to all users.

ZK Chains do not need to use the ZK Gateway and can settle directly to Ethereum, freely choosing to leave the ZK Gateway network without affecting the security of their chain. They can switch between using the ZK Gateway and settling directly to Ethereum. The ZK Gateway will be operated by a decentralized, trustless cluster of validators to ensure network resilience and reliability. ERC20 tokens are required to participate in this decentralized validation process. The ZKSync network governance will designate a token for this purpose (probably the ZK token).

Validators will receive a bridge fee and a fee for each byte of state delta data published to the ZK Gateway. This incentivizes validators to join the ZK Gateway because their income can increase exponentially with the value of on-chain transactions. In addition, due to the recompression service provided by validators, settling data through the ZK Gateway will be cheaper than settling directly on the Ethereum network, which may be the reason why most ZK chains may choose to join.

3. Polygon 2.0: Agglayer

Image credit: Polygon Agglayer

3.1 Origin of Agglayer Design

Similar to OP Stack and ZK Stack, blockchains created using Polygon CDK can be directly integrated into Agglayer, leveraging its unified bridge and security services to achieve interoperability with other blockchains. This constitutes the core architecture of Polygon 2.0.

The core idea of ​​Agglayer is derived from the Shared Validity Sequencing design proposed by Umbra Research. The design aims to achieve atomic cross-chain interoperability between multiple Optimistic Rollups. By using a shared sequencer, the system can uniformly handle the transaction ordering and state root publishing of multiple Rollups, ensuring atomicity and conditional execution.

To achieve this, three elements are needed:

• Shared sorter: receives and processes cross-chain transaction requests.

• Block construction algorithm: The shared sorter is responsible for building blocks containing cross-chain operations and ensuring their atomicity.

• Shared Fraud Proof: Implement a shared fraud proof mechanism between related Rollups to perform cross-chain operations.

Since existing Rollups already have the ability to pass messages between Layer 1 and Layer 2 in both directions, Umbra simply adds a MintBurnSystemContract (Burn and Mint) to complement these three components.

Workflow:

• Burn operation on chain A: can be called by any contract or external account, and recorded in burnTree if successful.

• Mint operation on chain B: After being successfully executed by the sequencer, it is recorded in mintTree.

Invariants and consistency:

• Merkle Roots consistency: The Merkle Roots of burnTree on chain A and mintTree on chain B must be exactly the same to ensure the consistency and atomicity of cross-chain operations.

System Operation:

• The shared sorter is responsible for publishing the transaction batches and declared state roots of both Rollups to Ethereum. It can be centralized or decentralized (such as Metis). The sorter receives transactions and builds blocks for Rollup A and B. If the transaction on A successfully interacts with the MintBurnSystemContract, it attempts to execute the corresponding Mint transaction on B. If the Mint transaction succeeds, it includes both the Burn transaction on A and the Mint transaction on B; if it fails, it excludes both transactions.

3.2 Agglayer core components:

In Polygon 2.0's Agglayer, Unified Bridge and Pessimistic Proofs are its core components.

1. Unified Bridge

Technical framework:

• Cross-chain communication: The core of Unified Bridge is to achieve seamless communication between different chains, and realize data and asset transfer between different Layer2 solutions and the Ethereum mainnet through cross-chain communication protocols.

• Liquidity Aggregation: The bridge aggregates liquidity from different Layer 2 solutions, allowing users to freely transfer assets between chains without worrying about liquidity fragmentation.

Implementation logic:

• Message passing: Unified Bridge achieves cross-chain communication through a message passing mechanism. The message contains relevant transaction information and is transmitted between chains through the bridge protocol.

• Asset Locking and Release: When a user locks assets on a chain, Unified Bridge releases assets of equal value on the target chain. This process uses smart contracts to ensure security and transparency.

• Interoperability protocols: To ensure interoperability between different chains, Unified Bridge uses standardized interoperability protocols. These protocols define how to process cross-chain transactions, verify transaction validity, and resolve potential conflicts.

Source: Aggregated Blockchains: A New Thesis

2. Pessimistic Proofs

Technical framework:

• Security: Pessimistic proofs are a security measure designed to prevent fraudulent transactions. It introduces an extra verification step during transaction verification to ensure that all transactions are valid.

• Delayed Verification: Unlike optimistic proofs, pessimistic proofs assume that transactions may be malicious and perform a full verification before confirmation.

Implementation logic:

• Initial verification: After the transaction is submitted, the system immediately performs initial verification, including checking basic transaction information, signature validity, etc.

• Deep Verification: After passing the initial verification, the transaction enters the deep verification stage, and the system calls a series of smart contracts to check the complexity and potential risks of the transaction.

• Dispute Resolution: If any issues are found during the verification process, the system will trigger a dispute resolution mechanism. This allows users and validators to submit additional proofs to resolve disputes and ensure the final validity of transactions.

Agglayer provides a highly secure, scalable and interoperable blockchain environment by integrating Unified Bridge and Pessimistic Proofs. These components not only enhance the security of the system, but also simplify cross-chain transactions, making it easier for users to interact across chains. For more details, please refer to YBB Capital's previous article "From Modularity to Aggregation: Exploring the Agglayer Core of Polygon 2.0".

4. Optimism: Superchain Explainer

In 2023, Optimism pioneered the one-click chain deployment path with its initial project, OP Stack, which established standards for a unified network. OP Stack is the launch platform for the Ethereum scaling solution Optimism Superchain, and is also the hub for interactions and transactions between all L2s built using OP Stack.

Optimism Superchain shares a common OP Stack development stack, bridge, communication layer, and security, ensuring that individual chains can coordinate and operate as a unit. This structure can be divided into five different layers, each with its specific purpose and function:

• Data Availability Layer: Determines the primary source of raw input to the chain based on the OP stack, primarily through Ethereum DA.

• Sorting layer: controls how user transactions are collected and forwarded, usually managed by a single sorter.

• Derivation layer: Processes the original data into the input of the execution layer, mainly using Rollup technology.

• Execution layer: defines the system state structure and conversion functions, with the Ethereum Virtual Machine (EVM) as the central module.

• Settlement Layer: Allows external blockchains to view the valid state of the OP Stack chain through proof-based failure verification.

Compared with Elastic Chain and Agglayer, Optimism Superchain was the first to enter the market and occupied a considerable share. It is worth noting that Base, based on which it was launched, accounts for a large part of the daily gas expenditure, reflecting its high on-chain activity.

Source: Dune Optimism — Superchain on-chain data

5. Subjective thoughts on one-click chain release

5.1 Competition Analysis between AggLayer, Superchain, and Elastic Chain

(This section only represents the author's personal views.)

The above three expansion plans continue the narrative of their respective Rollup expansion. From the perspective of market maturity, OP Stack and Superchain were the first to occupy the market, and Base is the most successful representative among them.

AggLayer has the advantage of native compatibility and can run directly on the existing Ethereum network without major modifications to the underlying protocol. This makes it more easily accepted by existing Ethereum users and developers. The challenge lies in ensuring the security and reliability of the aggregation process.

The initial judgment on Elastic Chain depends on the development of the ZKsync ecosystem and community building. If ZKsync itself cannot develop, Elastic Chain may face challenges in attracting developers and maintaining community enthusiasm. From the perspective of both market and technology, OP is optimistic in the short term and ZK is optimistic in the long term.

However, an inherent problem with all three solutions is the relatively centralized nature of Rollup. Recently, a Rollup-based scaling solution has emerged as a potential competitor. It moves the sorter directly to L1, Ethereum itself, eliminating the need for additional sorters or complex verification steps on L2. Despite some potential MEV issues, this more native scaling approach is worth keeping an eye on for future developments.

Source: ZKsync — Introduction to Elastic Chain

5.2 Future Trends and Application Innovations of Rollup

In general, with the promotion of "one-click chain launch", the number of Rollups as the main expansion solution of Ethereum will continue to increase. Even if the Bitcoin ecosystem prospers in 2023, its non-native expansion also borrows many Ethereum expansion concepts. In the case of limited market innovation, Rollup application innovation and impact may be limited.

For each VM chain, TVL is a key indicator no matter how the market changes, so the earliest applications may be various DeFi protocols. In addition, SocialFi protocols and NFT trading markets may also appear.

In other areas, DePIN may have difficulty developing on Rollup and L1, and Solana may be the leader. The RWA concept is more likely to develop on L1, but lacks confidence in Rollup. GameFi will also rise, but large-scale games will only have a chance on Rollup with GameFi as the core. Therefore, the most certain application at present is still DeFi-related.

However, the Matthew effect is obvious in the blockchain industry. With the advent of the multi-chain era, resources will be concentrated on leading projects, the strong will always be strong, and the weak will be eliminated.