Interoperability seems to be Ethereum’s Layer 2 biggest challenge currently, and Optimism is playing an active role in the quest to solve it. After backing the ERC-7683 messaging standard, OP Labs have now proposed ERC-7803, a new standard that aims to provide a fresh approach to making cross-chain transactions seamless. Join Vitalik Buterin and other industry leaders as they further shape the future of interoperability and cross-chain collaboration at the Ethereum Interop Forum happening in a few days.

Ink, the latest addition to the Superchain, has just launched their public testnet. The doors are now wide open for early birds looking to be a part of “building the future of DeFi.” In other news, Eclipse’s Layer 2 mainnet is now live. Combining the force of Ethereum’s security with the strength of the Solana Virtual Machine, the network hopes to provide users with the best of both worlds.

In this issue’s editorial, we provide you with a non-technical intro into ERC-7683, one of the standards that aims to provide a framework for cross-chain interaction on Ethereum Layer 2 and beyond. Ethereum remains committed to overcoming obstacles on its path to being the world’s supercomputer. The community is diligently working to enhance scalability, security, speed, and interoperability. Enjoy this issue of the Layer 2 Review, and see you in the next one.

Contributors: Lucent, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Introducing Ink.

🆕 The Ink Public Testnet is now live.

🔀 Help unify Ethereum.

➿ 08 days until the Ethereum Interop Forum.

⚡ Unichain testnet is now live, with more than 16M transactions processed.

⭕ A deep dive into foundational elements of the Superchain and Optimism's future.

🔥 Hot News

Eclipse Launches Ethereum's First SVM Layer 2 on Mainnet

Eclipse Foundation has achieved a significant breakthrough with the launch of its mainnet, introducing the first Layer 2 solution powered by Solana Virtual Machine (SVM) on Ethereum. The public mainnet debuts with an impressive roster of over 60 applications and service providers, including notable projects like Orca, Save, and Nucleus. This strategic initiative hopes to address the long-standing divide between Ethereum and Solana ecosystems, offering developers and users access to Ethereum's substantial liquidity and security framework while utilizing Solana's renowned speed and transaction capabilities.

The platform represents a technical breakthrough in blockchain interoperability, specifically targeting the limitations that have historically separated Ethereum and Solana developers. By implementing a Layer 2 solution that combines Ethereum's robust security features and established liquidity pools with Solana's efficient transaction processing, Eclipse creates a unified environment where developers can build applications that use the strengths of both networks. Interested in learning more about this new development? Check out this tweet. 👇🏽

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• https://forum.arbitrum.foundation/t/rfc-fund-completion-of-cex-dex-incentive-research/27416

• https://forum.arbitrum.foundation/t/proposal-add-support-for-eip-4788/27436

• https://forum.arbitrum.foundation/t/mission-activate-the-arbitrum-community-and-market-arbitrum-dao-arbitrum-fellowships-proposal/27475

Optimism

• https://gov.optimism.io/t/mission-request-superchain-track-at-crecimiento-hackathon/9191

Seamlessly Crossing Every Chain

Author: Lucent

With many Layer 2 rollups emerging, the Ethereum ecosystem has become quite fragmented. While these networks are helping scale Ethereum, they have introduced interoperability issues. In early August, Vitalik mentioned how soon these interoperability challenges could become a thing of the past, outlining three standard proposals that aim at resolving the issue.

ERC-3770 suggests a new address format for wallets and decentralized apps, making it easier for users to navigate different chains. ERC-7683 focuses on establishing a standardized method for Layer 2 networks to communicate and trade across different chains via liquidity providers, simplifying current processes. ERC-3668 introduces a standardized approach for Ethereum smart contracts to access off-chain data efficiently, known as “Layer 2 light clients,” that could reduce data storage costs on-chain.

In this article, we take a look at the ERC-7683 standard and how it could shape the future of interoperability on Ethereum.

ERC-7683: A Standard for Cross-Chain Intents

ERC-7683 aims to simplify and streamline initiating transactions across different chains within the Ethereum ecosystem and potentially beyond. Proposed by Across and Uniswap, it is referred to as a standard for “cross-chain intent” which is essentially a user’s directive to perform a specific action, such as transferring assets or executing a swap across chains.

The standard format encoded by ERC-7683 allows user intent to be verified across different networks, meaning users no longer have to submit unique instructions for each chain, as their encoded intent can be executed regardless of the blockchain. It basically allows users to initiate multi-chain transactions in a single step.

Mechanisms

One of the major pieces of ERC-7683 is the CrossChainOrder struct. Think of this as a packaged set of instructions that includes important details like the ID of the chain where the order starts, deadlines for completing it, and the address of the contract where the transaction should end. There’s also the ISettlementContract interface, which ensures that every order is initiated and resolved.

A simple workflow of the standard is as follows:

• Firstly, the user signs the order that includes all the necessary details for the transaction

• The order is then disseminated to fillers, who are basically participants within the ecosystem that facilitates the fulfilment of the cross-chain order.

• Once a filler is chosen for the transaction, the filler initiates the order on the source chain

• After the order initiation on the source chain is complete, user funds are escrowed and the filler performs order fulfilment on the destination chain

• Finally, the cross-chain settlement process occurs involving transferring the tokens to the user on the destination chain and compensation to the filler.

With the harmonized function of three layers; the intent, solver, and the settlement layer, interoperability is a step closer to being easier. User experience is also enhanced with wallets that support ERC-7683. These wallets make it simple to initiate multi-chain transactions and send alerts if something goes wrong or there’s a delay. ERC-7683 could significantly reduce the transaction fees and steps associated with moving assets across networks.

The Future of Interoperability?

The ERC-7683 standard creates a universal filler network, allowing various applications to use a shared structure for cross-chain transactions. The current ERC-7683 setup allows for flexibility and encourages competition among fillers, which can lead to faster transaction times and potentially lower costs for users. The increased competition may also boost overall liquidity, benefiting liquidity providers looking for the best opportunities to allocate their capital. For example, UniswapX leverages this standard to enhance cross-chain trading, letting users access trades with competitive pricing from multiple liquidity sources.

However, a key challenge remains in ensuring sufficient cross-chain liquidity. If there aren’t enough active fillers to fulfill users' cross-chain intents, the standard may not deliver optimal costs or improved experiences. Widespread adoption is essential; as more use cases and users embrace ERC-7683, it will attract more fillers, strengthening the system's efficiency. With support from major Layer 2 networks already, ERC-7683 could soon become widely adopted, bringing us closer to solving interoperability challenges.

If you would love to dive deeper into more technical details, check out this ERC-7683 documentation.

📈 Data

Total Value Locked on L2s is About $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

Base

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of November 7, 2024:

Welcome to the Layer 2 Review.

The Ethereum Interop Forum, a gathering dedicated to advancing interoperability across Ethereum L2, would be happening on November 16, at Bangkok. The forum hopes to unite core contributors to iterate on and refine shared standards for cross-chain interop. This event will prioritize participants with a proven track record in L2 research and development. If you fit the bill, visit the forum website to apply to attend.

In other news, Base is introducing fault proofs to its mainnet on October 30, a significant milestone on its path to decentralization on the Superchain. The Base team, in close collaboration with Optimism, aims to ensure a seamless and secure rollout of the fault proofs. Speaking of the Superchain, Ink is the latest protocol to join the train. Built by Kraken, one of the world’s leading crypto exchanges, Ink hopes to be the hub of seamless DeFi experience.

Arbitrum has unveiled a new configuration that enables faster withdrawals on its Orbit chains. So, instead of waiting the usual 7 days for Optimistic rollups, transactions on these chains would achieve finality in just about 15 minutes. This issue's editorial focuses on Ethereum's rollup-centric roadmap for scaling, covering key points from Vitalik Buterin's recent article on Ethereum's scaling efforts.

Stay tuned for more exciting updates. Enjoy the review and have a great time.

Contributors: Lucent, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Our Shared Optimism

🆕 Fast Withdrawals is Now Supported With Select Orbit Chains and RaaS Providers.

🔀 Welcoming Inkonchain to the Superchain!

➿ Optimism Retro Funding 5 Rewarded 8M OP to Developers Contributing to the Success of the OP Stack and Ethereum

⚡World chain by World Coin is Now Live on the Superchain and Powered by Alchemy Rollups

⭕ Mode Introduces Season 3: veMODE

🔥 Hot News

Kraken, one of the world's leading crypto exchanges, has announced its new Layer 2 network called Ink, built on the Superchain. By building on the Superchain, Kraken has added to Optimism's growing influence in the Layer 2 space.

To mark Ink's launch, a special NFT was created in collaboration with Optimism, which you can mint on Zora. These limited-time NFTs will serve as proof of being present at Ink's beginning. The launch timing shows good market awareness, as more companies are looking to scale their operations using Ethereum-based solutions. To learn more about the development, check out the broadcast attached below.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• [RFC] Arbitrum as the Home of Builders - embracing Chain Abstraction

• [Non-Constitutional] Arbitrum DAO Delegate Code of Conduct + Formalizing the DAO’s Operations

• Unifying Arbitrum’s Mission, Vision, Purpose (MVP)

• [Election & Application Thread] V2 Arbitrum Research & Development Collective

Optimism

• The Collective Feedback Commission: The Next Iteration

• Optimism Working Models for Decentralization

Polygon

• [Discussion] How to increase developers’ impact on protocol governance?

The Surge of Ethereum L2

Author: Kornekt

Since inception, scaling has been a major challenge for Ethereum. The network has sought to expand its capacity to handle high transaction volumes while preserving the critical characteristics of decentralization and security. With the blockchain’s demand constantly growing, Ethereum's future lies in its ability to build around its rollup-centric scaling model.

On Oct. 17, 2024, Vitalik Buterin released the second part of his article series on the “Possible Futures of the Ethereum Protocol.” The lengthy article focused on ongoing efforts around Ethereum scaling in the phase termed “the Surge.” Key goals of the Surge phase include:

• Achieving 100,000+ transactions per second (TPS) on L1+L2.

• Preserving the decentralization and robustness of L1.

• Ensuring that at least some L2s inherit Ethereum's core properties of trustlessness, openness, and censorship resistance.

• Promoting maximum interoperability among L2s so that Ethereum functions as a unified ecosystem.

The article goes into detailed analysis of the progresses so far and the work that’s left to be done to achieve the Surge milestones. Here, we provide a high-level summary of the article in seven top points so you get all the important details. All that's covered in this summary are as directly said or inferred from the original piece. This summary is only meant to provide an overview and inspire you to give the article a full read.

#1. The Rollup-Centric Roadmap

Ethereum initially had two primary scaling strategies: sharding and Layer 2 (L2) protocols. While sharding splits the network into several nodes, Layer 2 protocols function as secondary networks on top of Ethereum, keeping most data and computation off-chain.

L2 protocols' nomenclature has evolved over time, being called state channels in 2015, Plasma in 2017, and ultimately rollups in 2019. Ethereum's current roadmap emphasizes a rollup-centric approach. This year, the roadmap has experienced significant progress, especially with the data bandwidth increase on L1 via blobs.

#2. Overcoming the Trilemma

Ethereum’s early attempts at scaling ran into the scalability trilemma, but advancements in data availability sampling and SNARKs (Succinct Non-Interactive Argument of Knowledge) address these issues. Meanwhile, Plasma architectures coupled with SNARK enhancements also allow Ethereum to solve the trilemma and scale more effectively.

Ethereum underwent the Dencun upgrade on March 24, this added ~375 kB per slot of data availability bandwidth. However, the network aims for greater scalability, targeting 16 MB of data per slot in the medium term, which could push the network to 58,000 TPS when combined with data compression on rollups.

#3. Compression of Rollup Data

A significant barrier to scalability in rollups is the large amount of on-chain data each transaction requires. However, data compression techniques could significantly reduce this burden.

These techniques include Zero-byte compression, Signature aggregation, Pointer-based address replacement, and Custom serialization for transaction values to make data more compact. Data compression will require technical implementation but could allow Ethereum to achieve its scalability goals more easily.

#4. Plasma Systems and Hybrid Solutions

The article discusses Generalized Plasma, an evolution of earlier Plasma scaling solutions. Plasma systems have improved significantly since their early iterations. New SNARK-powered Plasma systems simplify the process, offering higher scalability and broader applicability. Hybrid plasma/rollup designs such as Intmax can also be explored, allowing for extremely high scalability and privacy, with capacities reaching up to 266,667 TPS.

#5. Layer 2 Maturity

Most rollups today still have a long way to go to achieve full trustlessness. While some have attained Stage 1, the goal is to have rollups advance to Stage 2. The hurdles of attaining Stage 2 can be overcome either through formal verification or using multi-prover systems. Both of these advancements will require significant research and development to reach full implementation.

#6. Cross-chain Interoperability

The current L2 ecosystem faces challenges related to interoperability. To create a unified experience, Ethereum needs cross-L2 improvements. This would involve introducing chain-specific addresses, chain-specific payment requests, standardized protocols for cross-chain swaps and gas payment, Light clients, keystore wallets, more radical “shared token bridge” ideas, and synchronous composability.

#7. Scaling Layer 1 Execution

While Ethereum’s rollup-centric roadmap focuses on scaling through L2s, there’s still a need to continue scaling Layer 1 to mitigate the risks that may arise if L1 remains too limited in processing transactions.

Potential strategies for scaling L1 include increasing gas limit, identifying features and computation that can be made cheaper without significant tradeoffs, and Ethereum may also explore native rollups, which would involve creating multiple parallel EVM instances within the protocol itself.

Conclusion

The article provides a comprehensive view of Ethereum's roadmap for scaling. The future of the network hinges on resolving technical challenges like data availability, proof system maturity, and cross-L2 interoperability. With these advancements, Ethereum aims to achieve massive scalability while preserving its core ethos of decentralization and security.

Read the full article to get a complete breakdown and explanation of the points highlighted here.

📈 Data

Total Value Locked on L2s is About $38 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

Base

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of October 24, 2024:

We are constantly seeing new and exciting developments unfold on Ethereum’s layer 2. Uniswap, the largest decentralized exchange, is set to launch its own blockchain, Unichain, as a Layer 2 network on Ethereum built using Optimism's OP Stack. This move promises faster transactions and improved liquidity.

Scroll is making a major move toward decentralization with the upcoming launch of its native token, SCR. Scheduled for October 22, the token will be listed on Binance and a portion will be distributed to eligible users. Of the 1 billion SCR tokens, 15% will be airdropped, 35% allocated for ecosystem growth, and 17% reserved for investors, with the remainder going to the Scroll Foundation and contributors.

Next up, Optimism's Airdrop 5 has gone live, rewarding power users who have actively contributed to the growth of the Superchain ecosystem. These users have engaged with leading apps across social, DeFi, gaming, and more on the Superchain, proving that when we build and contribute together, everyone benefits.

This issue’s editorial is perfect for you if you’re looking to be a part of the coming airdrops in the Layer 2 space. Keep your eyes peeled for what’s next, because in this space, the only thing constant is change. Stay on the cutting edge of innovation and keep exploring the future.

Contributors: Ritaakubue, Melasin, Lucent Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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Share

🗞️ Ecosystem Updates

⛓️ Optimism Unveils Airdrop 5 for Superchain Users

🔀 Retro Funding 6: Optimism Governance Sign Up is Now Open!

➿ Optimism Partners Edge City’s Interop Day to Enhance Ethereum Ecosystem Growth

⚡Welcoming Unichain to the Superchain

⭕ Magic Eden Ecosystem Joins Arbitrum With Ubisoft’s New G.A.M.E Launch

🔒 Holders of the Infinite Rainbows NFT Can Now Redeem Stylus Merch!

📈 Arbitrum Online Hackathons Running Now Until End of October – Join the Action!

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• [Non-Constitutional] Arbitrum Token Swap Pilot Program

• [RFC](Non-Constitutional): Integrating zkTLS-Powered Oracle Solution (zkFetch) for Arbitrum

• Make Arbitrum Alignment Legible

• From Engagement to Rewards: A Comprehensive Analysis of Participation and Incentives (Part 2 - Final Report)

Optimism

• Cycle 28 Grants Final Roundup

Polygon

• Introducing Our New DNS Discovery for Polygon PoS: Faster, Smarter, More Connected!

Fueling the Next Wave of Layer 2 Airdrops

Author: Lucent

The Ethereum ecosystem has seen rapid expansion with the rise of Layer 2 solutions addressing scalability challenges. As these networks gain momentum, airdrops have become the most popular way to distribute tokens and drive community engagement.

Airdrops are a marketing strategy where blockchain projects distribute free tokens to users, driving engagement and adoption. For Layer 2 projects, this tactic helps incentivize developers and users to build and use their platforms, boosting network visibility. Airdrops from projects like Arbitrum and zkSync have fueled significant participation by rewarding users based on criteria such as wallet activity and transaction history.

However, maintaining user interest post-airdrop is often a challenge. Successful airdrops have led to spikes in network activity, but there’s much groundwork to be done between the initial hype and the eventual token distribution. Let’s examine how some top L2 protocols are preparing for potential token launch and how users can position themselves to benefit from these airdrops.

Scroll

Scroll is a Layer 2 solution leveraging zkEVM technology to scale Ethereum while maintaining compatibility with the Ethereum Virtual Machine (EVM). Since its mainnet launch in October 2023, Scroll has rapidly grown in terms of total value locked (TVL), boasting over $1.25 billion per L2Beat, at the time of writing.

Scroll employs a gamified approach to encourage network activity. The Scroll Sessions program, a part of Scroll's strategy, enables users to earn "Scroll Marks" based on their activity within the ecosystem. These marks may contribute to user eligibility for the upcoming airdrop of SCR, Scroll’s native token. Beyond these marks, Scroll runs a badge system where users earn non-transferable badges that signal their involvement in the ecosystem.

Scroll has announced its first airdrop of its native token, SCR, scheduled for October 22, 2024 and will distribute 7% of the total token supply. Another 8% will be reserved for future airdrops. This approach fuels engagement and aligns with Scroll’s goal of decentralizing governance, as SCR will play a crucial role in the platform’s decision-making process.

Linea

Linea, developed by ConsenSys, is another Layer 2 solution that adopts zkEVM technology, similar to Scroll. However, unlike Scroll, Linea is yet to announce an official airdrop date. Still, it has kept its community engaged through the Surge Program, a point-farming initiative that enables users to accumulate Voyage XP points (LXP). These points could play a key role in the future token airdrop, which many speculate will follow a similar structure to zkSync or Arbitrum’s past distributions.

The Surge Program incentivizes liquidity provision and asset onboarding across different DeFi protocols. The program splits into six monthly phases, known as "Volts," and will continue until either six months have passed or the network reaches a total value locked (TVL) of $3 billion.

This system encourages early and sustained participation by rewarding liquidity providers with ecosystem points, which multiply based on liquidity levels and decay over time for those who engage later. Users can also earn Referral Points and Veteran Points for bringing new participants into the ecosystem and their contributions to other blockchain projects, respectively.

The point-farming phase has the dual benefit of growing Linea’s ecosystem while building anticipation for its potential token launch. While the timeline remains uncertain, early-stage participants will most likely benefit the most from the airdrop.

Optimism

We cannot talk about L2 airdrops without talking about Optimism. The Optimism Collective operates a community-focused approach with an economic model built to benefit both builders and users. Builders receive funding through the retroactive public goods program, while users gain from OP token airdrops and project incentives. So, if you’re not building, you’re likely a user, with plenty of airdrop rewards if you stay engaged.

A notable 19% of Optimism’s total OP token supply is earmarked for user airdrops, rewarding those who contribute to the Optimism and Ethereum communities. Optimism's airdrops are structured in multiple waves, recognizing active participants, particularly those underrepresented in traditional Ethereum spaces. The first airdrop distributed 5% of the total supply to 248,699 addresses, while the second airdrop allocated 11,742,277 OP to 307,965 unique addresses, rewarding governance participation and consistent network usage. Airdrop 3, held in September 2023, distributed 19,411,313 OP to 31,870 addresses, focusing on contributors across the Optimism ecosystem. Airdrop 4 shifted focus to builders and creators within the Superchain.

The latest wave came just yesterday; Airdrop 5 distributed 10,368,678 OP tokens to 54,723 addresses that had actively engaged with the Superchain ecosystem between March 15 and September 15, 2024. Users who interacted with at least 20 unique contracts and maintained a contract-to-transaction ratio of 10% or higher, were eligible. Additional bonuses were available for those who completed at least 10 app transactions per week over 20 distinct weeks or participated in SuperFest missions or engaged in any of the other bonus-eligible activities.

If you missed out on Airdrop 5, don’t worry, there’s more to come. Over 500 million OP tokens are reserved for future airdrops. To increase your chances of qualifying, stay active across the Superchain, interact with multiple dApps, and explore diverse contracts within the ecosystem. Optimism is nowhere near finished, who knows how many more waves they have in store?

Bunch of Free Money?

Airdrops aren’t just about luck; they require intention, effort, and timely action. As we're seeing with Scroll, Linea, and Optimism, these opportunities reward users who actively engage with the ecosystem, whether it’s farming points, interacting with dApps, or contributing liquidity. It's not enough to sit on the sidelines and hope for a windfall. If you're serious about being part of the next wave of airdrops, explore these networks, understand their tools, and stay consistent. The networks are growing, the rewards are real, but it's up to you to get involved.

📈 Data

Total Value Locked on L2s is About $35 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

Base

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of October 10, 2024:

Welcome to the L2 Review, where we provide the latest developments, insights, and emerging trends in the dynamic Layer 2 ecosystem.

Optimism’s Retroactive Public Goods Funding (RetroPGF) 6 will see up to 3.5 million OP distributed among contributors to Optimism Governance during Season 5 and Season 6. This covers impact between October 2023 and September 18, 2024. The focus includes infrastructure and tooling, governance analytics, and leadership within the superchain governance. Applications were opened today and will run till October 10. For more details on eligibility and the application process, click here.

Base is rolling out a global series of regional buildathons, targeting Africa, India, Southeast Asia, and Latin America. From September 27 to October 13, these events will offer a total prize pool of 100 ETH for teams building onchain applications that address local community challenges. This initiative shows Base's commitment to empowering non-US builders and driving the adoption of onchain tech for impactful solutions.

This issue’s editorial takes you through the highs and lows of top Ethereum L2s this September. L2s are pushing boundaries across onchain activity, governance, innovation, and beyond with no sign of them slowing down. Count on us to bring you timely updates and insights into these advancements as they unfold.

Contributors: Lucent, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

Share

🗞️ Ecosystem Updates

⛓️ OptimismGov approves Bases’s grant request of 3 million OP.

🆕 Create your animated Superchain story featuring NounsDAO & SUNNY for a chance to win from 5K OP reward!

🔀 Track every time Ethereum was declared dead since 2014, using Ethereum Obituaries.

➿ Sign-ups for Retroactive Funding 6 for Optimism Governance nerds have commenced!

⚡Bridged USDC Standard is now available for all Arbitrum Orbit chains.

⭕ The 5th edition of Phase 2 Arbitrum Ambassador Weekly is here

🔒 The upgrade to ArbOS 32 is now completed on Arbitrum One, Nova, and Sepolia.

🔥 Hot News

Starknet Takes Big Step in Layer 2 Staking

Starknet is making waves by being the first to offer staking services on Ethereum Layer 2, showing its commitment to decentralization. This means users can now earn rewards by staking their STRK tokens, participating in the network’s security. The community got to vote on important details about how the staking will work. Starknet plans to test this new system later this year, with the live version launching around the same time. Currently, experts are auditing the staking contract to ensure it's safe to use. Interested in learning more? Check the X post below for more details.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Arbitrum daoURI Proposal Security Review

• Arbitrum Security Council Emergency Action - ArbOS 32

• [Non-Constitutional] Funds to Bolster Foundation’s Strategic Partnerships Budget

Optimism

• Accelerated Decentralization Proposal For Optimism

• Retro Funding 6: Governance - Round details

• Badgeholder Onchain Analysis Report

Polygon

• PIP-47: Protocol Council Multi-Threshold Smart Contract Upgrades

Starknet

• SNIP-20: Enshrined Paymasters for ERC-20 tokens

L2 Race Heats up in September: Base Leads the Way

Author: Kornekt

Activity on Ethereum’s Layer 2 networks has been nothing short of phenomenal. Top projects like Base, Arbitrum, and Optimism are stealing the show from Mainnet, bringing to life the scalability vision. Base L2 is making and breaking records, hitting new highs in terms of onchain metrics. Following the broader market recovery, top L2 native tokens like ARB and OP have also risen from their lows. 

In this article, we review activity so far among the top three Layer 2 projects this month, especially focusing on onchain metrics and developer activities. What do the numbers tell us about Layer 2 progress in these past weeks? Let’s find out!

Onchain Metrics

We can measure onchain activity using several yardsticks. Among them, two stand out to give a picture of the extent of usage, they include the number of active addresses and transaction count. 

The number of active addresses on a network tells of the number of addresses trafficking the chain within a specified amount of time. It indicates the number of unique addresses that are involved in a successful transaction (as a sender or receiver) within the network and can be a major indication of activity. Transaction count, on the other hand, is the total amount of unique transactions that occurred on a network within a particular timeframe.   

Both metrics are not perfect indicators of human onchain activity as several factors can influence the number of active addresses and transaction count including market sentiment and bot activity. Nevertheless, they are still significant enough to describe the extent of usage.

What Do the Numbers Say?

According to data from GrowThePie, so far in September, Base has stood tall with over 18M active addresses, a steady increase from the previous month. The network hit a new all-time high in active addresses on Sep. 21 with about 1.5M addresses engaging in over 4.7M transactions on that single day. Base is the first Ethereum L2 to hit these numbers.

Arbitrum One and OP Mainnet on the other hand have so far had 2.7M and 1.01M active addresses respectively this month. At the time of writing, transaction count on both networks in the past day were 1.78M and 751k respectively. In comparison, Ethereum mainnet has recorded 4.7M active addresses so far in September with 1.1M transactions in the past day.

It’s no news that Base has been on an explosive run this year in terms of onchain metrics. The recently concluded Onchain Summer event, the launch of basenames, smart wallets and other factors could be further fueling the growth of the network.

The chart of active addresses and transaction count on the top L2 networks are proceeding in opposite directions as Base seems to be soaring on a lane of its own. The question is, can Base sustain the heat?

Developer Activity

The number of devs actively working on a project and building on the network is an important metric to determine how a blockchain network is evolving. More developer activity signals faster development; and new and improved initiatives would attract more users, ultimately boosting the network’s activity. As such, many networks put up several programs and incentives to attract devs. The aim as always is to make the chain as builder-friendly as possible. 

Developer activity can be in the form of core devs building and maintaining the network’s underlying infrastructure and dApp or smart contract devs using the network’s tools to spin out several use cases.  

According to data from DeFiLlama, Base has 14 core devs working on the network in September. In contrast, Arbitrum and Optimism have 39 and 47 core devs respectively. Ethereum mainnet remains the central hub for devs with 352 core devs.

On the scene of smart contract deployment, according to data from Nansen, daily deployment on Base has hit a peak of 644k and a low of 102k since the beginning of September. On Arbitrum, deployments have ranged between 4.4k and 32k so far this month, that of Optimism was between 12k and 131k. Ethereum mainnet on the other hand had a high of 88k and had dipped to about 3.5k smart contract deployments. 

This data shows that more smart contract devs are trooping to Base to launch their projects. It’s not surprising as Base currently offers the fastest throughput in the entire Layer 2 ecosystem and offers one of the lowest (near zero) transaction fees. 

The Future is Here?

On several fronts, from active addresses to transaction count, Layer 2 solutions are displaying the scalable potential of Ethereum, flinging the doors wide open for global adoption. It’s interesting to see the rapid development of projects like Base, taking over the stage in a very short time. As Ethereum continues to build on its rollup-centric model for scaling, we will most likely see new developments that will outpace the current standards. We are not in the future yet but it’s closer than it had ever been.

📈 Data

Total Value Locked on L2s surpasses $35 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

Base

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of September 26, 2024:

We may be seeing some drastic measures regarding rollup nomenclature and standards as Vitalik Buterin recently announced his decision to only recognize L2 solutions that are at least Stage 1 as from next year. Projects that remain at Stage 0 decentralization may not be recognized or regarded to as rollups on Ethereum.

Stylus went live on Arbitrum mainnet on September 3, flinging the doors wide open for traditional developers to build on the network using WebAssembly (WASM)-compatible languages. This exciting development unlocks powerful use cases with WebAssembly smart contracts which are interoperable with solidity contracts.

Base is poised for another significant growth phase following the launch of Coinbase’s wrapped Bitcoin, cbBTC. According to the announcement, the wrapped BTC token will be supported on the layer 2 network and Ethereum.

In this issue’s editorial, the author introduces us to Morph, a budding layer 2 network on Ethereum. Will the network find sustained use cases or just fade away after initial hype? Stay tuned as we provide you with latest insights and developments around the world of Ethereum’s layer 2.

Contributors: Lucent, Ritaakubue, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

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🗞️ Ecosystem Updates

⛓️ Vitalik's message to L2s

🆕 OP Retro funding 5 sign up has ended

🔀 Arbitrum Stylus: Now Live on Mainnet

➿ Arbitrum Security Council Election: Call for Candidates Now Open!

⚡The Arbitrum Portal is the home to all Orbit chains

⭕ Integration Announcement: Bubbly finance partners with Arbitrum

🔒 gTrade surpasses $50 billion total trading volume on Arbitrum!

🔥 Hot News

Movement Labs Bets on 'Postconfirmations' to Boost Ethereum Scalability

Movement Labs is reportedly developing a new mechanism for rapid transaction settlements on layer 2 networks, with plans to launch by the end of 2024.

According to co-founder Rushi Manche, this system, called "postconfirmations," could potentially reduce confirmation times to under one second.

This innovation comes as a result of the significant growth of Ethereum's L2 solutions, with total value locked surging to nearly $35 billion. This surge highlights the increasing demand for scalable solutions that would put an end to limited transaction throughput.

Movement's approach aims to address limitations in existing L2 solutions, such as the lengthy finality periods of optimistic rollups and the high costs associated with zk-rollups. The proposed system would allow applications on Movement's upcoming M2 network to optionally use a validator network secured by the MOVE token.

To learn more about this recent development, check out the full article here

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• RFC - Fund an Incentives Working Group

• Establishing a DAO Events Budget for 2025

• Transaction Ordering Policies & Value Accrual in L2s

Optimism

• Cycle 27 Grants Preliminary Review Report

Polygon

• Erigon v2.60.7 Release for Amoy Testnet (Ahmedabad Hardfork)

Starknet

• SOS blocks in the Decentralized Starknet Protocol

Is It Morphing Time Yet?

Author: Lucent

Morph L2 is a budding layer 2 network on Ethereum that claims to be “powering the global consumer layer for everyday users”. The network hopes to directly address blockchain's biggest challenges: scalability and security, while offering a more user-friendly experience than traditional blockchain infrastructure. In this article, we provide an overview of Morph’s architecture, market strategies, and challenges. With all the development team is putting in place, will Morph be the next big deal on Ethereum or will it simply join the already long list of layer 2 “solutions”?

The Morph Architecture

Morph employs a Responsive Validity Proof (RVP) System, which combines the strengths of optimistic and zero-knowledge (ZK) technology. This hybrid system allows for faster finality, lower transaction costs, and greater scalability — all critical components for consumer-facing applications. As blockchain technology evolves, balancing these factors will be essential for attracting mainstream developers and users.

Another of Morph’s innovations is its decentralized sequencer network, designed to resolve the limitations of traditional centralized sequencers which several L2 solutions currently operate. Typically, a single sequencer can become a central point of failure, exposing the system to transaction censorship and monopolization of Miner Extractable Value (MEV). Morph has taken the decentralized approach for its sequencers, looking to provide scalability while ensuring fairness and efficiency. Their sequencer design features Byzantine Fault Tolerance (BFT) consensus, BLS signatures, and a modular design to enhance functionality.

Market Strategy

Morph allows users to stake their native tokens to participate in the network's security. Token holders can delegate their tokens to nodes, known as sequencers responsible for processing transactions. The more tokens a node has staked, the higher its chances of producing blocks, creating an alignment between participation, rewards, and network decentralization.

In May 2024, Morph introduced the "Morph Zoo", a multi-stage program aimed at engaging and rewarding participants within their testnet, hoping to keep users actively engaged. The campaign started Season 1 with The Genesis Jungle. This event is helping to drive user engagement and gather feedback in preparation for the mainnet launch. Participants earn Morph Points for interacting with various decentralized applications (dApps).

On the financial side, Morph raised $20 million in a funding round led by Dragonfly earlier in March to fund development.

The Ghost Chain Trap

A Ghost Chain is a blockchain with minimal activity and user engagement until it becomes obsolete. So far, Morph is trying to prevent this pitfall through community engagement and developer participation, which are important ingredients for an active ecosystem.

One of Morph's initiatives to avoid becoming a ghost chain was the SparkLoom Incubator Program, which encouraged developers to build on its testnet. This, with strategic partnerships, expands Morph's reach, potentially creating a wider user base.

Morph recently announced the creation of the Centralized Exchange Coalition, partnering with exchanges such as Bitget, HTX, MEXC, and Poloniex. These partnerships ease the listing process for vetted projects, making it easier for developers to access liquidity and for their projects to gain visibility and by extension, strengthen Morph’s position in the ecosystem.

Will Morph L2 Succeed?

From the roadmap, it’s clear that Morph has ambitious goals, but achieving success will require more than innovative technology. While its decentralized approach and user-friendly vision are admirable, the true test lies in execution. Has Morph built a strong community to stay in the top L2s? Will the applications built on the platform offer real, tangible value to users? Time will answer these questions.

This post does not contain financial advice, only educational information. By reading this article, you agree and affirm the above, as well as that you are not being solicited to make a financial decision, and that you in no way are receiving any fiduciary projection, promise, or tacit inference of your ability to achieve financial gains.

📈 Data

Total Value Locked on L2s is About $34 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Optimism

Top Projects by TVL in the Last 7 Days

Base

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of September 13, 2024:

The momentum in the Layer 2 ecosystem shows no signs of slowing down, with several exciting developments making headlines. Among the most intriguing is Pepe Unchained (PEPU), a new L2 on Ethereum purpose-built for meme coins. The project recently hit $11 million in its presale, signaling robust enthusiasm within the meme community.

Meanwhile, Arbitrum is preparing to launch Stylus, a groundbreaking development set to go live on September 3, 2024, coinciding with the platform’s anniversary. Stylus allows developers to buidl on Arbitrum using more developer-native languages like Rust, C, and C++. This, combined with faster computational efficiency and more efficient memory usage, positions Arbitrum for a major developer influx.

Optimism has also made headlines with the introduction of Soneium to its Superchain. Sony Block Solutions Labs officially introduced Soneium, an Ethereum Layer 2 developed on the OP Stack to bridge the gap between web3 and traditional internet services, making blockchain technology more scalable and user-friendly for the average consumer.

These developments are just the tip of the iceberg of advancements unfolding across the Layer 2 ecosystem.

Explore the world of zkEVMs as this issue’s editorial takes us on a tour of the tech powering general-purpose zk-rollups. Scroll on as we bring you the latest insights and updates from the top Layer 2 projects reshaping the future of blockchain.

Contributors: Lucent, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

Share

🗞️ Ecosystem Updates

⛓️ How (and why) the Superchain drives fees to the Optimism Collective

🆕 Bridged USDC Standard has arrived on the OP Stack!

🔀 Applications for Retro Funding 5 is now open

➿ Track the latest Superchain contributions via the Superchain Health Dashboard.

🔥 Hot News

Sony's Soneium is Bridging the Entertainment and Blockchain Industry with its Innovative Layer 2 Solution

Sony Group's blockchain subsidiary has taken a significant step into the web3 space with the launch of the "Minato" testnet for Soneium, their Ethereum Layer 2 blockchain. This move shows Sony's strategic push to leverage its entertainment and gaming expertise on the blockchain, aiming to create practical applications that enhance user experiences.

Soneium is designed to bring blockchain technology to the forefront of gaming and entertainment, to improve how in-game assets are managed through NFTs, and to explore new financial models within the industry.

The launch of Soneium comes at a time when blockchain technology is gaining traction across various sectors. Sony's entry could accelerate the adoption and development of user-friendly, scalable blockchain solutions. This initiative demonstrates how traditional entertainment giants can adapt to developing technologies to create new value for their audiences.

For developers, Soneium offers an exciting opportunity. The "Soneium Spark" incubation program, running alongside the Minato testnet, provides a comprehensive support system. This includes technical workshops, mentorship from industry leaders, and access to Soneium's advanced features. Most notably, qualified projects can receive up to $100,000 in funding, with the potential for further investment through Sony's partner network.

For more details on Soneium and how to get involved, be sure to check out the tweet below.👇🏾

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• RFC - Delegate Incentive Program v1.1

• Constitutional - Extend Delay on L2Time Lock

• Establishing a DAO Oversight Committee to bring strategy, process & accountability to treasury management on Arbitrum

• Unifying Arbitrum DAO’s Vision, Mission, and Goals

Optimism

• Upgrade Proposal #10: Granite Network Upgrade

• Proposal Title: Rolling Mission Requests

• Cycle 26 Grants Preliminary Review Report

Polygon

• Announcing the Farcaster Frame Innovators Program

Starknet

• Cairo v2.8.0 is out!

The World of zkEVMs

Author: Kornekt

In a previous article, I did an intro into zero-knowledge (zk) proving and how scaling solutions are applying the technology to enhance Ethereum’s scalability. While zk technology is very efficient, its inherent complexity introduces challenges that limit its general-purpose application.

If all we wanted to use zk-rollups for was specialized functions like facilitating token payments and exchanges, then it would have been perfect. However, issues arise in an attempt to extend its functionality for generalized smart contract operations while still keeping it compatible with the Ethereum Virtual Machine (EVM).

Unlike their Optimistic counterparts, zk computations in their basic form are not inherently compatible with the EVM — the environment in which Ethereum smart contracts run. The EVM wasn't designed with them in mind. As such, there is a need to create an environment suitable for zero-knowledge computations and still compatible with the EVM. This is so that zk-rollups can offer the same smart contract functionality as Ethereum. This is where zkEVMs come into play.

Bridging the Gap With zkEVMs

A zkEVM, or Zero-Knowledge Ethereum Virtual Machine, is an extension of zk-rollups that aims to make them fully compatible with the EVM. This means that zkEVMs can execute Ethereum smart contracts off-chain and generate zero-knowledge proofs that these executions were performed correctly. These proofs can then be submitted to the Ethereum mainnet for verification, just like conventional zk transaction proving.

The challenge in creating zkEVMs lies in replicating the behavior of the EVM in a zero-knowledge-proof-friendly environment. The EVM is complex, supporting a wide range of operations, including arithmetic, storage access, conditional branching, and lots more. Generating a zero-knowledge proof for an arbitrary EVM computation requires encoding these operations in a way suitable for zero-knowledge proof generation and verification.

Working Principle of zkEVMs

To achieve the goal, zkEVMs feature an execution layer for smart contracts, similar to the EVM, and a proving circuit for generating zk proofs to validate state changes arising from the execution layer. The proofs are then submitted to a verifier contract on Ethereum responsible for validating the state changes on mainnet.

By doing so, zkEVMs enable developers to deploy and run their Ethereum smart contracts without modification while benefiting from the scalability and cost-efficiency of zk technology.

As simple as this sounds, it is very computationally intensive and requires a good knowledge of cryptography and the EVM itself. Perfectly modeling the EVM in a zk environment can be daunting. As a result, developers of zkEVMs make certain tradeoffs to balance the need for EVM compatibility with the performance of the system.

These tradeoffs have led to several distinctions in how zkEVM developers approach their building. Vitalik Buterin created a "taxonomy” of the different types of zkEVMs, distributing them into four major types according to the tradeoffs between EVM compatibility and performance.

Classification of zkEVMs

Type 1: Fully Ethereum Equivalent

These zkEVMs aim to match Ethereum exactly as it is, without making any changes to the consensus layer. This means they don't alter any core aspects of how Ethereum works in their zkEVM. Because they stick so closely to the original design, these zkEVMs ensure the highest level of compatibility with Ethereum. However, this also means that generating proofs takes longer and can be more expensive.

Type 2: Fully EVM (Not Ethereum) Equivalent

This type of zkEVM closely mimics the Ethereum Virtual Machine (EVM) but modifies some parts of the Ethereum stack to make zk proving faster. These changes make proof generation faster while still maintaining compatibility with existing Ethereum applications. However, they are not an exact match of Ethereum’s structure like type 1 zkEVMs.

Type 3: Almost EVM Equivalent

These zkEVMs are designed to be very similar to the EVM but are optimized for zero-knowledge-proof efficiency. They simplify or remove certain features of the EVM to make the proof generation process faster and more efficient. As a result, developers might need to modify their smart contracts to run on these zkEVMs. While these types exist now, the goal for many is to eventually evolve into a type that closely matches the EVM without needing such trade-offs.

Type 4: High-Level Language Equivalent to EVM

These zkEVMs take a different approach by translating smart contract code (usually written in Solidity) into a custom-designed language that is optimized for zero-knowledge-proof systems. This approach significantly speeds up the proof generation process but does not directly execute the original EVM bytecode. Instead, it converts the code into a more proof-friendly format.

Current Implementations of zkEVMs in Layer 2 Rollups

Several projects are actively developing and implementing zkEVMs to bring scalable and privacy-preserving smart contract functionality to Ethereum layer 2. Notable among them are ZKsync, Polygon zkEVM, Scroll, Linea, and Starknet.

These projects take different approaches to build their zkEVM based on ease of application and user-friendliness. However, the goal for many is to ultimately be a type 1 or type 2 zkEVM offering complete equivalence with Ethereum or the EVM.

“Personally, my hope is that everything becomes Type 1 over time…However, it is going to take quite some time until we get to such a future.” — Vitalik Buterin.

The complexity of zkEVMs has made the development of general-purpose zk-rollups slower than their Optimistic counterparts. For instance, no zkEVM rollup has attained stage 1 decentralization. But like Vitalik stated in his rollup primer:

The Zero-knowledge Future

zkEVMs represent a significant advancement in Ethereum scaling, offering a promising solution to the challenges of scalability, privacy, and cost-efficiency. One major talking point with the tech is composability and interoperability between different zkEVMs. There is also the issue of decentralization and security due to the centralization of processing on single sequencers. Despite the current challenges, with several projects actively developing and implementing zkEVMs, the technology will only get better making the future of Ethereum increasingly scalable and user-friendly.

📈 Data

Total Value Locked on L2s is About $36 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

Base

Top Projects by TVL in the Last 7 Days

Polygon zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees Update

Transaction Fees as of August 29, 2024:

Welcome to this week’s L2 review, where we explore the latest updates and upgrades shaping the future of scalability and efficiency in blockchain technology.

Ethereum L2 transactions have soared to a record 12.5 million, with Coinbase’s Base and Arbitrum One leading the charge. Conversely, L2 fees have dropped significantly from a peak of $4.2 million in March to just $171,514 on August 13, showing improved efficiency following the Dencun upgrade. The stablecoin market cap on L2s now stands at $9.69 billion, though active addresses have fallen by 16.23% to 5.29 million.

Cronos zkEVM has just launched its ZK chain on the alpha mainnet, joining ZKSync’s Elastic Chain vision. The zkEVM comes with exciting features like a custom gas token, layered yield, account abstraction, and much more.

This issue’s editorial touches on the subject of rollup maturity stages, exploring the advancements on the path toward complete decentralization of Ethereum’s layer 2.

Scroll on to stay tuned on the latest updates and insights!

Contributors: Ritaakubue, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

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🗞️ Ecosystem Updates

⛓️ Building a unified Superchain

🆕 Arbitrum and Optimism becomes the first full-EVM rollups to reach stage 1.

🔀 Race joins the Superchain

➿ The Superchain is enabling onchain creativity!

🔥 Hot News

Interoperability at its Finest

Optimism's development team has unveiled an ambitious roadmap to enhance interoperability within its Layer 2 ecosystem, known as the Superchain. This plan aims to seamlessly connect various chains like OP Mainnet, Zora, and Base, addressing the current fragmentation of assets and users across the network.

The Superchain currently relies on Ethereum's Layer 1 for secure communication and asset transfers. The proposed native interoperability solution seeks to create a unified experience, allowing users, assets, and developers to move freely across different chains as if they were operating on a single blockchain.

Key features of the implementation will include a cross-chain messaging protocol, a universal token standard called SuperchainERC20, and an interoperable fault-proof system for secure asset transfers. The rollout plan involves a phased approach, starting with a developer network, followed by a testnet, and ultimately a mainnet launch.

The roadmap extends beyond the Superchain, aiming to standardize user experiences across the broader Ethereum ecosystem. This includes adopting universal cross-chain interfaces like ERC-7683 for asset transfers.

To get more information about this update check out the post below 👇🏾

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• STEP II Steering Committee

• Enhancing Multichain Governance: Upgrading RARI Governance Token on Arbitrum

Optimism

• A case for the organizational chart

Polygon

• Bor v1.3.7 release

• Announcement : zkEVM Mainnet beta Update

Starknet

• Immutable Component Config

Rolling Up the Decentralization Stages

Author: Lucent

On June 10, 2024, Optimism achieved a significant milestone by attaining stage 1 decentralization. This achievement was marked by the launch of permissionless fault proofs on its OP Mainnet, enabling users to execute withdrawals without the need for centralized third-party intervention. With this development, Optimism joins Arbitrum as one of the leading rollups in this category.

In a recent X post, Vitalik Buterin praised both Arbitrum and Optimism for becoming the first full-EVM rollups to achieve stage 1 in the quest for full decentralization. He also expressed his anticipation for the first zk-rollup to reach this milestone. While we provided a primer on rollup stages earlier this year, this article goes a little step further to explain the decentralization stages and how stage 1 rollups like Arbitrum and Optimism are advancing towards stage 2.

Understanding the Stages of Rollup Decentralization

Achieving full decentralization is a gradual process, like the growth of a child into adulthood. Stage 0 represents the "baby stage," where rollups operate under centralized control, with the development team holding significant authority. This centralization allows the team to censor transactions or block withdrawals, providing a safety net during the early development phases.

Stage 1, which can be likened to an "adolescent stage," introduces a degree of decentralization, though the system still retains some oversight. A critical component of reaching stage 1 is the existence of a functional proof system. Additionally, a security council oversees the network. Importantly, at least two council members must not be from the development team. Users are also provided with a seven-day exit window to withdraw funds independently, a safeguard against significant changes.

With Optimism now joining Arbitrum in stage 1, these rollups have implemented all the features outlined above. Reaching this stage is a significant step toward full decentralization. But what factors have given these rollups an edge in achieving stage 1 decentralization?

Do Optimistic Rollups Have an Edge?

One notable observation is that the general-purpose rollups currently in stage 1 are predominantly optimistic rollups. Base's recent introduction of permissionless fault proofs on its Sepolia testnet demonstrates how close it is to reaching stage 1. Furthermore, FuelV1, a stage 2 rollup, also uses optimistic rollups, highlighting the potential of this technology to advance through the stages of decentralization.

dYdX and zkSync Lite, which are zk-rollups currently having the stage 1 tag are only application-specific rollups that do not require EVM compatibility. As it stands, no general-purpose zk-rollup has attained stage 1 decentralization.

Several factors contribute to the faster development of optimistic rollups. Their full EVM equivalence facilitates seamless integration with existing Ethereum applications without requiring modifications, making it relatively easy to deploy the infrastructure necessary for attaining stage 1 decentralization.

The same can’t be said of general-purpose zk-rollups that use the zkEVM. The complexity introduced by zkEVM presents execution challenges that may slow their progress toward stage 1. This is because of the tradeoff between EVM compatibility and performance associated with the different types of zkEVMs.

The Path to Stage 2

Progressing to stage 2 decentralization presents a formidable challenge for the teams working toward it. However, Optimism co-founder Karl Floersch remains confident that his network will achieve stage 2 soon. According to Floersch, once a network reaches stage 2, others are likely to follow in due course.

Arbitrum has already made significant strides toward stage 2 with the introduction of the BOLD dispute resolution protocol. This proposal aims to empower honest participants to defend against malicious claims, playing a crucial role in the further decentralization of rollups.

At present, DeGate V1 and Fuel V1 are the only two networks having stage 2 decentralization. The question now is which of the stage 1 rollups will be the first to join them? It's only a matter of time before we find out.

📈 Data

Total Value Locked on L2s dips below $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

zkSync

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of August 15, 2024:

Welcome to the L2 Review, where we bring you the latest layer 2 updates. The past few weeks have seen significant developments in the L2 ecosystem, and we're here to keep you informed.

One of the major developments is Movement’s connection with Polygon’s AggLayer. This initiative opens up altVMs, creating a bridge between these protocols and EVM ecosystems.

According to data from Token Terminal, Base now hosts 80% of active Uniswap users. This underscores its growing influence and the increasing adoption of L2 solutions within the crypto ecosystem. Additionally, Artifact Lab has partnered with Eclipse to launch data staking on Ethereum L2, offering users enhanced privacy and new income opportunities.

This issue's editorial is a primer into zero-knowledge proofs, the technology that powers zero-knowledge rollups. It promises to be an engaging read.

Seat back and scroll on to stay informed about the latest in the world of layer 2s.

Contributors: Lucent, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

Share

🗞️ Ecosystem Updates

⛓️ Ethereum Layer 2 networks have hit a new all-time!

🆕 Coinbase L2 Base hosts 80% of active Uniswap traders — Token Terminal

🔀 Ternoa’s zkEVM Layer 2 leverages AvailProject to boost

⚡Rewards category is now live on the Arbitrum Portal!

⭕ Introducing Frame It: An Arbitrum x Farcaster Buildathon

🔒 The Gaming Catalyst Program Elections have officially begun.

📈 The Arbitrum Foundation Grant Program Phase 3 just ended.

🔗The on-chain vote for ArbOS 31, featuring Stylus and other significant updates, is now live.

🔥 Hot News

Interoperability in the blockchain ecosystem has just taken a significant leap forward. Movement Labs has announced its participation in the development of the AggLayer, an extraordinary initiative aimed at bridging the gap between Move and Ethereum Virtual Machine (EVM) ecosystems.

This development is particularly exciting because it opens up new possibilities for altVMs (alternative virtual machines), potentially improving how different blockchain ecosystems interact. Movement’s integration into the AggLayer will unify users and liquidity across MoveVM Layer 2 chains, bringing together an impressive $160 million in Total Value Locked (TVL).

Movement Labs is also launching a MoveVM public testnet that leverages Celestia's Data Availability (DA) layer. This testnet will integrate with the AggLayer and feature six pioneering projects:

1. Echelon Market

2. MovePosition

3. Avitus Labs

4. Meridian Money

5. BRKT

6. Infiniseas

The goal of this innovation extends far beyond just connecting Move and EVM ecosystems. Its ultimate mission is nothing short of unifying the entire web3 landscape. This includes bringing together users, developers, various programming languages, smart contracts, and different blockchain networks – including non-EVM chains and Layer 1 solutions

Interested in learning more about this new project? Read the post below.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Arbitrum Ventures Initiative Hub

• [RFC] ArbitrumDAO Governance Analytics Dashboard

• Should the DAO Default to using Shielded Voting for Snapshot Votes?

• AIP: ArbOS 31 “Bianca” - Activation of Arbitrum Stylus, RIP-7212 Support, & Nova Fee Router Proposal

Optimism

• Retro Funding 5: OP Stack - Round Details

• Retro Funding 5: Expert voting experiment

• Code of Conduct Council S6 Election Town Hall

Polygon

• PIP-45: PoS MRC-20 Token Symbol change

• Bor v1.3.4 release for Mainnet (PIP-35)

• Thrive Polygon Update: July 23rd to 29th

The Layer of Zero Knowledge

Author: Kornekt

As Ethereum celebrates its ninth anniversary, scaling problems remain one of the network’s biggest setbacks. The Ethereum community has been building around a rollup-centric model to address these scaling challenges. There are two types of rollups: Optimistic and Zero-knowledge. 

The model of optimistic rollups is easy to understand – assume transactions are valid unless proven otherwise within a given timeframe. However, comprehending the operations of zero-knowledge rollups (which involve complex cryptographic maths) can be quite daunting.

In this article, we provide a simple and beginner-friendly intro to zero-knowledge technology.

Zero-Knowledge Technology

Is it possible to show someone you know something without actually revealing details of that particular thing? Like proving you know a secret without revealing the secret itself? Welcome to the world of zero-knowledge proofs – cryptographic protocols that allow a party (the prover) to prove to another party (the verifier) that they know a value without conveying any information apart from the fact that they know the value. 

Zero-knowledge proving is a concept that is not native to cryptocurrency but has found wide applications in the industry. Beyond blockchains and cryptocurrency, ZK proofs find application in privacy-focused identity verification, voting systems, supply chain management, and several other sectors. 

Generally, ZK proving can happen in two forms: Interactive and Non-Interactive.

Interactive Zero-Knowledge Proofs

In this type, the prover and verifier engage in a dialogue, with the prover convincing the verifier of their knowledge through multiple rounds of communication. It provides a high level of security and is well-suited for real-time applications. However, interactive proofs require multiple rounds of interaction, and as such are not ideal for asynchronous systems.

Non-Interactive Zero-Knowledge Proofs (NIZKs)

As the name suggests, these proofs eliminate the need for a dialogue between the prover and verifier. The prover generates a single message that can be verified independently by the verifier. NIZKs are efficient and scalable, perfect for blockchain and other decentralized systems. Although they are slightly less secure compared to interactive ZKPs.

Zero-Knowledge Proofs in Layer 2 Rollups

Several layer 2 solutions use Zero-knowledge technology to prove transaction validity before batching it to the Ethereum mainnet. In essence, these protocols operate in the same way every other rollup would, only that they submit a ZK proof (also known as Validity proof) to confirm the validity of their transactions. 

Any verifier can compute the proof to ascertain the validity of the transactions without actually going through the transactions one after the other. While it is computation-intensive, ZK proofs provide a faster and more secure method of transaction settlement on the base layer. 

A Typical ZK Rollup Operation

Here’s an outline of how transaction settlement occurs on a typical ZK rollup:

1. Transaction Batching: A large number of transactions are bundled together into a batch. This batch is processed off-chain by a sequencer or a set of validators.

2. State Transition Calculation: For each transaction in the batch, the rollup calculates the resulting state changes. This involves updating account balances, smart contract storage, and other relevant data.

3. zk-Proof Generation: A zk-proof is created to prove the correctness of the state transition. This proof demonstrates that the new state is a valid result of applying the transactions to the previous state without revealing the details of the transactions or the intermediate state.

4. Proof Submission: The zk-proof, along with a compressed representation of the state transition (e.g., a Merkle root), is submitted to the main chain.

5. On-Chain Verification: A smart contract on the main chain verifies the zk-proof. If the proof is valid, the compressed state is updated on the main chain.

Types of Zero-Knowledge Proofs

ZK rollups use non-interactive zk proofs which come in different fashions. Here’s a little intro to these proofs:

zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge)

This is a specific type of non-interactive zk proof (NIZK) that is highly efficient and generates very short proofs. They are based on complex cryptographic assumptions. They are highly secure, efficient, and require no interaction. However, they require complex setups and higher computational requirements. Examples of layer 2 solutions using zk-SNARKs are Scroll and Linea.

zk-STARKs (Zero-Knowledge Scalable Transparent Argument of Knowledge)

This is another type of NIZK that is based on different cryptographic assumptions than zk-SNARKs. They are more transparent and require no trusted setup. They are scalable, transparent, and post-quantum resistant. A drawback though is that they require larger proof sizes compared to zk-SNARKs. Starknet is an Ethereum rollup using the zk-STARK technology.

PLONK (Permuted Lagrange basis for Oecumenical Noninteractive arguments of Knowledge)

PLONK is a universal and succinct NIZK that uses a generic setup for various applications. It is versatile and can be used for a wide range of applications. Although it can be more complex to implement compared to other NIZK systems. ZKSync uses PLONK for its state validation.

Future Developments

There are ongoing developments in the scene of zero-knowledge proofs. These developments are aimed at reducing computational overheads and proof sizes, developing stronger resistance to potential threats from quantum computers, EVM compatibility, and other measures to increase effectiveness, developer friendliness, and user experience.

Optimism is currently moving to incorporate zk proofs in its OP stack. As the technology continues to advance, we will likely see more protocols adopt zk proofs for increased efficiency in this race to scale Ethereum.

📈 Data

Total Value Locked on L2s surpasses $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Optimism

Top Projects by TVL in the Last 7 Days

zkSync

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

🔥 L2 Fees and Costs Update

Transaction Fees as of August 1, 2024:

The L2 ecosystem is never short of news, updates, and upgrades; as you know, this is the place to learn and stay apprised of developments as they happen.

On July 2, ZKSync unveiled the Elastic Chain — ZKSync 3.0 protocol upgrade. This upgrade allows for the creation of a network of interoperable ZK chains, built on the ZK Stack — more like the ZK version of Optimism’s Superchain and Arbitrum’s Orbit. Lens Protocol is planning for its official mainnet launch on ZKSync, set to take place in the final quarter of 2024, according to reports from BSCN.

On September 4, the long-awaited upgrade from MATIC to POL will commence on the Polygon PoS network. POL will replace MATIC as the native gas and staking token on the PoS network. DeFi protocols and dApps on Polygon PoS, Ethereum, and zkEVM will update their infrastructure to support the POL token. Stakers and delegators of MATIC on Ethereum, who secure the Polygon PoS network, will have their MATIC automatically converted to POL.

In this issue’s editorial, we take a dive into Ethereum’s layer 2 ocean to observe the whales dominating the scene. There's more as you scroll, so relax and enjoy the world of Ethereum’s L2s.

Contributors: Lucent, Melasin, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Optimism Retro Funding 4 results are out.

🆕 Introducing the Superchain Identity.

🔀 MODE is Now an Omnichain Asset!

➿ Arbitrum (Re)delegation Week is on.

⚡Huddle01 dRTC Unveils its L3 on Arbitrum.

⭕ RISC Zero is now live on Arbitrum.

🏁 Arbitrum Foundation supports the Launch of the first DeSci Chain, Now Live on Testnet.

🔥 Hot News

BNB Chain Unveils New Layer 2 Solution to Boost Scalability

In a notable move to address scalability challenges, BNB Chain has announced the launch of opBNB, a new layer 2 scaling solution. This development marks a major step forward in BNB Chain's efforts to enhance its blockchain network's performance and user experience.

opBNB, currently in testnet phase, is built on the Optimism OP Stack and promises to deliver improved security and scalability. The new layer 2 chain boasts impressive capabilities, including support for over 4,000 transfer transactions per second at a remarkably low cost of less than $0.005 per transaction.

Key features of opBNB include:

1. Ethereum Virtual Machine (EVM) compatibility

2. Optimized data accessibility and caching

3. Increased gas limit of 100 million per block

4. Simplified integration process through RPC service layer

This new product is expected to significantly enhance BNB Chain's position in the competitive blockchain landscape. While this is cause for excitement, many are still skeptical about the way this innovation was introduced and are looking to events that will happen in coming weeks to help determine how to proceed.

For more information about this development, check out the full article.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Jumpstart fund for DAO improvement

• (Re)delegation Week Kick-Off and Agenda

Optimism

• Tribuni Alpha Launch: Telegram Mini-app Built by Delegates for Delegates

Polygon

• MATIC → POL: Migration Coming September 4th

• Thrive Polygon Update: June 11th to July 15th

• Council Transparency Report: PIP 26 & 40

Starknet

• Cairo v2.7.0 is coming!

• SNIP 18: Staking’s First Stage on Starknet

Ethereum’s Layer 2 Whales

Author: Lucent

Since Arbitrum and Optimism pioneered the rollup race in 2021, dozens of other networks have sprung up, employing different approaches to scale Ethereum. Today, according to L2BEAT, there are 63 active layer 2 networks and 80 others in the works. Together, they have a TVL of about $44 billion. The top five networks account for a very large chunk of this TVL, holding over 80% of the entire value. Safe to say, they are the whales of Ethereum L2.

In this article, we’ll be giving you a quick breakdown of these top layer 2 networks, highlighting their features, projects under them, and more. Let’s get into it..

Top Five Ethereum Layer 2 Networks by TVL

#5 Mantle

#5 on the list is Mantle, with a TVL of $1.37B as of the time of writing. Mantle was launched in July 2023 as a network aiming to drive mass adoption of decentralized and token-governed technologies. The network recorded 797k active addresses in the past month with a transaction count of 13.59M. Mantle takes an interconnected approach, separating transaction execution, consensus, settlement, and data availability into distinct layers.

An important property of the Mantle ecosystem is its strong financial backing and incentive programs. One of which is the $200 Million EcoFund, catalyzed by 100 million USDC from BitDAO's treasury, to invest in native applications and technology partners building on the Mantle network. They also provide a combined allowance of $300 million in USDx, ETH, BTC, and MNT to support ecosystem growth and partnerships through liquidity support for applications. This liquidity support helps attract and retain projects building on Mantle.

To mark its first year anniversary, Mantle is doing a commemorative NFT mint which is still ongoing. Get to know more about it in this X post.

#4 Blast

Blast L2 is an Optimistic rollup that offers native yield generation for Ether (ETH) and stablecoins. This means that users can earn yields on their ETH and stablecoin holdings directly on the Blast L2 network, without the need for separate staking or yield farming protocols. The network has a TVL of $2.65 Billion, with over 860k active addresses in the past month and 20.89M in transaction count.

By sharing gas revenue with dApp developers, Blast gives developers the flexibility to either keep the gas revenue for themselves or use it to subsidize gas fees for their users. The Blast airdrop snapshot and token distribution took place on June 26, 2024, with users having to claim the airdrop within 30 days.

Apart from the remarkable airdrop, users on Blast can now bridge between Blast and Ethereum Mainnet in just seven days, which is twice as fast as before —14 days. Projects like Orbit Protocol, a DeFi platform offering lending, borrowing, and trading functionalities, and KAP Games are top platforms on the network.

#3 Optimism

Optimism mainnet went live in December 2021. It is now the third largest L2 solution in the Ethereum ecosystem with a TVL of $6.77B. Active addresses in the past month tally at 1.79M with a transaction count of 14.21M. The Optimism Foundation is not just building a rollup but an ecosystem of interconnected L2 networks that they call the Superchain.

A portion of Optimism's transaction fees are directed to the Retroactive Public Goods Funding (RetroPGF) program, which rewards projects that provide value to the Optimism ecosystem. The Optimism Retroactive Public Goods Funding (Retro Funding) program was launched in 2023. The first round of Retro Funding opened for applications in January 2023 and since then, Optimism has allocated 850M OP tokens (20% of the initial token supply) to fund the Retro Funding program. In the first three rounds, a total of 30 million OP tokens have been distributed to contributors. The RPGF is in its fourth round and you can read more about it here.

Some top projects running on Optimism include Aave V3, Synthetic, and Velodrome. To know more and get started on Optimism, follow the steps outlined on the network's official website.

#2 Base

Launched in 2023 by Coinbase, Base has experienced dramatic growth in just a short time. The network has outpaced the competition to become the second-largest rollup with a current TVL of $7.27B. The network had 9.55M active addresses in the past month with a transaction count of 94.12M.

Designed to be a highly secure and decentralized L2 solution, Base leverages Optimism's OP Stack, which includes advanced features like fraud proofs and state commitments, to ensure robust security. The network is also a major stakeholder in Optimism’s Superchain initiative. Some DeFi projects and gaming platforms like Aave, Synthetix, Immutable X and Uniswap are top projects on Base. To get started on Base, follow the steps outlined here.

#1 Arbitrum

Arbitrum is the elephant in the room of Ethereum rollups. The network seats comfortably at the top spot holding about 40% of the entire layer 2 market share. In the past 30 days, 7.15M active addresses interacted with the network with a transaction count of 62.13M.

Like Optimism, Arbitrum is also building an ecosystem of permissionless chains, they call it the Arbitrum Orbit. Many well-known DeFi platforms use Arbitrum One, such as Uniswap, Aave, Ankr, and OpenSea.

In addition to Arbitrum One, Arbitrum launched Arbitrum Nova in August 2022. Nova is a new chain built with AnyTrust technology and is designed to scale the Ethereum blockchain even further. Arbitrum Nova reduces costs even further and is one of the most cost-efficient blockchains today. The chain focuses primarily on high-throughput dApps, making it suitable for gaming-focused apps, as well as NFTs, tools, nodes, and bridges.

To get started on Arbitrum, follow the steps outlined on the Arbitrum website.

📈 Data

Total Value Locked on L2s surges past $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL in the Last 7 Days

zkSync

Top Projects by TVL in the Last 7 Days

zkEVM

Top Projects by TVL in the Last 7 Days

Happy New Month and welcome to the second half of the year.

The aftermath of the ZKsync token airdrop saw a significant sell-off, with over 41% of initial recipients liquidating their entire allocations on the first day. This massive sell-off pushed nearly $500 million worth of ZK tokens into the open market, causing a sharp price drop to around 20 cents.

On June 26, Blast, an Ethereum Layer 2 network created by the founder of NFT marketplace Blur, officially launched its token airdrop. The project allocated 50% of the airdrop to developers through Blast Gold and the other half to early users through Blast Points, based on their wallet and dApp balances.

Additionally, the Arbitrum Foundation announced its support for the EDU Chain blockchain for education. This network will allow EDU Chain Layer 3 transactions to settle on Arbitrum's Layer 2.

This issue’s editorial turns the spotlight on Base and its rapid advancement in just a year after its public debut. As the year progresses, we anticipate more exciting developments in the Layer 2 space. Stay tuned here to keep apprised of events as they happen.

Contributors: Lucent, Melasin, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Deadline Extended for Arbitrum Foundation Grants

🆕 The ArbitrumDAO NEEDS YOU

🔀 Retro Funding 4, Onchain Builders Applications Voting.

➿ Season 6 of Optimism Gov Officially Started on June 28th

⚡Mint Blockchain Public Mainnet is Live

⭕ A Deep Dive Into Optimism Superchain

🔒 Introducing SuperFest - the Superchain DeFi Festival

📈 Introducing Laïka - Doge Layer2 SPUTNIk ll incentive program

🔥 Hot News

Optimism Governance Season 6 is Live

Optimism Governance kicked off Season 6 on July 1, 2024, with the theme: "Optimizing to Support the Superchain." The season is set to run until December 11, 2024.

The key intents for the season include progressing towards decentralization, bringing chains to the Superchain, and growing application developers.

Several representative structures have been renewed, including the Developer Advisory Board, Grants Council, and Anticapture Commission. However, if you are interested in participating in the Code of Conduct Council, keep an eye out elections for this will begin on August 1.

Notably, Season 6 Mission Grant applications will open on July 18 and occur every 3 weeks until the season's end. This presents an opportunity for developers and projects to secure funding and contribute to the Optimism ecosystem.

For full details, interested parties can refer to the comprehensive guide on the Optimism Governance website.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Entropy Advisors: Exclusively Working With Arbitrum DAO

• What is (Re)delegation Week?

Optimism

• Retro Funding 5: Announcing Guest Voter Participation

• Grants Council Internal Operating Procedure - Season 6

Polygon

• PIP-42: Polygon 2.0 - Upgrade PoS Staking to Use POL

Basis for Base's L2 Glory

Author: Kornekt

Base, a relatively new kid on Ethereum’s layer 2 block, is effortlessly taking over the stage, edging other networks to secure the top spots. It was barely a year ago when Base became officially available to the public. Today, it is the second-largest rollup with a TVL of $6.89B (at the time of writing), displacing Optimism which had long held that first runner-up position.

For context, it roughly took over two years for Arbitrum and Optimism to attain a similar TVL, according to data from L2BEAT. In more successes for Base, the network displaced Arbitrum in the last 30 days to stand top with the highest transaction count in Ethereum's L2 transactions.

Base is firing on top gear and is showing no sign of slowing down. What’s responsible for this explosive surge? Let’s find out!

What’s Behind Base’s Growth?

Base’s momentum so far is not without certain key drivers. Several factors are responsible for this sporadic advancement. Here are some of them.

The Coinbase Influence

Base is built by Coinbase, and it’s not far-fetched that the popularity of the exchange is a major factor that contributed to its rapid growth. Coinbase, the largest crypto exchange in the US and a publicly traded company is an established player and boasts to be the first publicly traded entity in the US to own a blockchain. Even before Base became officially available to the public, excitement for the chain had been simmering right from the announcement, leading to millions in TVL while the project was still in developer testing mode.

Outrageously Cheap Fees

Base is one of the cheapest L2 on Ethereum, with transaction costs way less than a cent. According to data from growthepie, the average transaction cost on Base in the past month was ~$0.004, that’s about 99.95% less than gas fees on mainnet. This insane transaction fee on Base followed the Dencun upgrade that drastically slashed fees on L2 networks. Base seemed to be the biggest winner from Dencun though as the upgrade led to an immediate 350% jump in average daily transactions on the network. This number has continued to climb ever since with Base leading the pack in the past month in terms of transaction count.

Developer-Friendly Approach

Base has several features that make it the go-to network for developers looking to build. This includes EVM compatibility, interoperability features, Account Abstraction (ERC 4337), APIs for gasless transactions, smart contract wallets, and several other exciting features. All these make it easy for builders to migrate from mainnet to Base or build something afresh on the network.

Getting Started on Base

At its core, Base is an optimistic Ethereum layer 2 rollup, designed to offer a secure, cost-effective, and developer-friendly environment for building decentralized applications. The rollup is built on Optimism's OP Stack, inheriting its security and functionality and being a major partaker in the Superchain ecosystem. According to Coinbase, the development of Base is a major part of phase 4 of their Secret Master Plan which is targeted at creating an open financial system that increases economic freedom globally.

It’s important to note though that Base is still a work in progress. According to L2BEAT, the network is in Stage 0 of the decentralization process, lacking a proof system and some other features that make it remain on full training wheels. The network is currently incubated by the parent company Coinbase but has plans to ‘’progressively decentralize in the years ahead’’.

Check out their website to learn more about Base or get started with building on the network.

📈 Data

Total Value Locked on L2s drops back to $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

Welcome to this week's L2 Review, where we dive into the latest advancements in the Layer 2 landscape. The recent ZK airdrop has infused significant capital into the ZKsync ecosystem, generating waves of excitement. ZKsync Era, Ethereum's prominent ZK Rollup Layer 2 solution, distributed its governance token, ZK, which is now available on leading exchanges. Despite recent uproar over its airdrop, excitement is mounting for its emergence, which is poised to challenge the top 50 cryptocurrencies.

Base, which created its genesis block a year ago, has since amassed more activity than nearly every other Ethereum Layer 2 network. Also, the Arbitrum Foundation's DAO has made a pioneering decision, dedicating 225M ARB tokens to fuel growth in their gaming ecosystem with the Gaming Catalyst Program (GCP), set to revolutionize gaming.

Evidently, the Layer 2 momentum is stronger than ever. The strides made in technology and community engagement continue to shape a more scalable and decentralized future. Stay tuned for more mind-blowing updates.

Contributors: Ritaakubue, Melasin, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Introduction of Optimism Fault Proofs and Stage 1

🔥 Introducing the Superchain Identity

⚡ XterETH Chain is Live on the Superchain

🌐 Allora network to provide AI Solutions Across ZKsync Ecosystem.

✅ The Matter Labs ZK Pledge

🔗 SkaleNetwork Ranks Second Among top Layer 2 Blockchain Networks with the Most Transactions

🪙 Blast Gold Distribution 5 is now Live

🔥 Hot News

OP Mainnet has Achieved Stage 1!

Optimism Mainnet has taken a significant step towards complete decentralization in new developments, reaching Stage 1 of its decentralization roadmap. Following the latest update to its architecture, Optimism has introduced fraud proofs, allowing anyone to propose and challenge state roots on Ethereum.

Introducing forced L1->L2 transactions means that users can now permissionlessly exit the Optimism network without relying on centralized operators. This marks an upward shift and further ignites the hope of achieving true decentralization.

The Optimism community and developers eagerly anticipate Stage 2 of the decentralization journey, which promises even greater levels of trustlessness and decentralization.

As word spreads about Optimism Mainnet's progress, the excitement in the blockchain and DeFi ecosystem grows. This development demonstrates the unwavering quest for fully decentralized and resilient networks, paving the door for a more secure and transparent future for blockchain technology. Find out more below!

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Adjusting Arbitrum’s Gas Fees

• Request for Proposal - The ADPC Security Services Panel and Procurement Framework

Optimism

• V2. Code of Conduct Council Operating budget re-scope for season 6. (cycle 23b)

Polygon

• PIP 38 - Phased expansion of Validator Slots on Polygon PoS

Layer 2 Airdrop Revolution?

Author: Lucent

Earlier this month, Matter Labs announced one of the largest airdrop campaigns in Layer 2 history. The ZKsync airdrop distributed 17.5% of the total 21 billion ZK tokens to eligible participants. Valued at over $2.5 billion, the airdrop primarily rewarded active users and contributors within the ZKsync ecosystem.

The airdrop aimed to recognize early adopters and promote community engagement. It ensured fair distribution by capping individual addresses at 100,000 tokens, marking a significant moment in the blockchain and decentralized technology space. This approach empowered the community to shape the future of the ZKsync ecosystem.

Of the 3.675 billion ZK tokens airdropped, 89% were allocated to eligible ZKsync users, while the remaining 11% went to other contributors. This made it the largest Layer 2 airdrop in terms of distribution. Unlike previous airdrops, where the core team typically receives a large portion or an even split, ZKsync's model promotes broader participation and decentralized governance.

Eligibility was based on seven factors, each carrying one point. Criteria ranged from having carried out transactions on ZKsync Era or Lite chains to participating in other onchain activities on the network. Eligible users were to start claiming from June 17, 2024 until January 3, 2025, while contributors will be able to claim their tokens from June 24, 2024. Addresses with fewer than 450 ZK tokens had their tokens recycled back into the pool, while those with over 100,000 tokens had the excess recycled. This further ensured a fair distribution.

Security Obscurity

Despite the measures put in place to ensure an equitable distribution, the crypto community criticized the ZKsync airdrop for its perceived lack of effective Sybil protection, which potentially allowed abuse by "farmers" using multiple wallets to game the distribution.

Mudit Gupta, the information security chief of rival Layer 2 network Polygon, criticized the airdrop as "most farmable and farmed airdrop ever probably" with "almost no Sybil filtering." He claimed the eligibility criteria were easy for "farmers" to meet but difficult for real users.

Another crypto investor, Adam Cochran, said the eligibility criteria were "easy to not hit as a real user, and easy to hit as a farmer, and had no anti-Sybil program." A Sybil-tracking account estimated that 135 million ZK tokens, worth up to $52.3 million, could be headed for Sybil wallets based on data from LayerZero Labs.

Market Reactions

The token premarket launch price dropped around 43% after ZKsync released details of the airdrop, suggesting a negative market reaction. The negative reaction was likely confirmed when the market price at the time the airdrop went live was around $0.3, and as of writing, the market price was $0.2215 according to CoinMarketCap.

As expected, the airdrop sparked significant reactions due to the massive hype surrounding it. Some believe the low market price might be attributed to the broad allocation of ZK tokens within the community, rather than being concentrated in the hands of a few individuals.

In comparison, the Arbitrum airdrop distributed about 1.1 billion ARB tokens out of a total supply of 10 billion. Starknet's airdrop distributed over 700 million STRK tokens, with 50.1% managed by the Starknet Foundation for developer rewards, ecological project incentives, community spending, and reserves.

Optimism Despite the Criticism

In response to the community reaction, crypto exchanges like Binance and KuCoin have listed the ZK token and are running their own token distribution programs to alleviate concerns. Binance is giving away 10.5 million ZK tokens to eligible users.

Further analysis will be needed as events surrounding the airdrop unfold. However, one thing is certain: the ZKsync ecosystem prioritized community. Their human-first approach may have caused some issues but there is no doubt that the ZKsync team believes that community is the backbone of this ecosystem. This is why it might be important to watch out for some projects like SyncSwap, Maverick, and Symbiosis on the ZKsync network.

📈 Data

Total Value Locked on L2s Approaches $50 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

ZKsync

Top Projects by TVL

zkEVM

Top Projects by TVL

The L2 space has been buzzing with remarkable developments, and it’s exciting to witness the growth and momentum of Layer 2 solutions. Base continues to be at the forefront with the latest announcement of Coinbase's Smart Wallet. Base's expansion coincides with the rollout of this self-custodial solution designed to bring over a billion users onto the blockchain.

Recent data shows that Base is surpassing both Optimism and Arbitrum in growth, with its total value locked (TVL) hitting an all-time high. This surge comes as investors eagerly await the launch of Coinbase’s new smart wallet, which aims to provide a seamless transition for users moving from centralized exchange accounts to decentralized applications (dApps).

Lately, we are seeing more projects hop onto the L2 train. ENS Labs has unveiled a significant proposal, ENSv2. This next-gen implementation is aimed at extending ENS to a selected Layer 2 network, promising reduced costs, faster transactions, and enhanced functionalities.

As the Layer 2 journey continues to unfold, we’re delighted to have you with us every step of the way. Stay on the cutting edge and keep exploring the dynamic and captivating L2 ecosystem.

Contributors: Ritaakubue, Melasin, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

Share

🗞️ Ecosystem Updates

🔒 Layer 2 Base Achieves Record TVL Ahead of Coinbase’s Smart Wallet Launch

🆕 IOTA Launches Layer 2 Ethereum Virtual Machine Network Focused on Real-World Asset Usage

🔀 Coin98 Integrates ZKFair, Elevating Multi-Chain Efficiency for Users

⚡Layer 2s as cultural extensions of Ethereum

🔮 ENS Labs introduces the ENSv2

🔔 Push Protocol is now live on Arbitrum

🎮 Zypher Games forms an alliance with Manta network

🏦 OpenEx: BTC Layer2 Integration Strategy

🔥 Hot News

Fhenix Announces Fully Homomorphic Encryption Layer 2 for Ethereum

Fhenix, a blockchain startup, has just raised over $15M in Series A funding. This is a huge milestone for the project and has further advanced the plan to launch a Layer 2 rollup for Ethereum that incorporates fully homomorphic encryption (FHE). Their goal is to bring confidentiality and data privacy capabilities to Ethereum's smart contracts.

The Fhenix Layer 2 will be the first FHE EVM-compatible rollup, lowering the barriers for Solidity developers to build confidential smart contracts. By doing this, Fhenix unlocks novel applications that rely on data confidentiality. The startup plans to support developers with infrastructure, documentation, tooling, grants, and bounties to spur the adoption of confidential smart contracts. With confidentiality enabled, Fhenix believes Ethereum can fully realize its potential as a permissionless network that returns data sovereignty to its users.

Check out the thread below for more information regarding this project 🔥👇🏽

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Arbitrum Multi-sig Support Service (MSS) Nomination Thread

• Powerhouse: Operations and Transparency Research Proposal

• [Non-Constitutional] Pilot Stage: Treasury Backed Vaults research and development

Optimism

• Retro Funding 4: Impact Metrics, a Collective Experiment

• Upgrade Proposal #9: Fjord Network Upgrade

Celo

• Leadership changes at cLabs

Blockchain Sequencers

Author: Boluwatife

The concept of blockchain sequencers was introduced due to the blockchain trilemma on L1 networks which states that no blockchain perfectly achieves all three properties: security, decentralization, and scalability. To curb this, blockchain sequencers were developed to facilitate the smooth operation of Layer 2 scaling solutions, enabling blockchains to handle an ever-increasing volume of transactions while maintaining the desired level of security and trust.

Blockchain sequencers are specialized nodes or entities responsible for processing, ordering, and batching transactions before submitting them to the main blockchain (Layer 1). They act as intermediaries between users and the underlying blockchain, ensuring that transactions are efficiently and securely processed while reducing the burden on the main chain.

What Problem Do Blockchain Sequencers Solve?

The importance of sequencers lies in their ability to address the scalability challenges blockchains face. As the number of users and transactions on a blockchain network increases, the network can become congested, leading to slower transaction times and higher fees. Sequencers provide a solution by offloading a significant portion of the transaction processing and validation to a separate layer, thereby alleviating the load on the main chain.

Sequencers play a crucial role in enabling Layer 2 scaling solutions, such as rollups, which are designed to increase the throughput and reduce the costs associated with blockchain transactions. By efficiently processing and batching transactions, sequencers facilitate the submission of these batches to the main chain, allowing for significant improvements in scalability while inheriting the security guarantees of the underlying blockchain.

How Do Blockchain Sequencers Work?

1. Receiving and Ordering Transactions

Sequencers are designed to receive transactions from users or applications and order them according to specific criteria. This ordering process can be based on various factors, such as timestamps, transaction fees, or custom prioritization rules.

2. Creating Batches or Blocks

Once the transactions have been ordered, sequencers batch them together into larger units, often referred to as "batches" or "blocks." This batching process allows for more efficient processing and reduces the overhead associated with submitting individual transactions to the main chain.

3. Submitting to the Main Chain

After creating the batches, sequencers submit them to the main blockchain for validation and inclusion in the next block. Depending on the Layer 2 solution being used, this submission process may involve generating and submitting validity proofs (e.g., in the case of ZK-Rollups) or simply publishing the batch data (e.g., in the case of Optimistic Rollups).

Types Of Blockchain Sequencers

1. Centralized Sequencers

Centralized sequencers are operated by a single entity or organization, which has complete control over the sequencing process. Most of the time the entity controlling it is the team behind the L2 blockchain itself. This centralization approach offers several advantages, including simplicity and efficiency. With a centralized sequencer, transaction processing, and batching can be optimized for speed and throughput, as there is no need for complex coordination among multiple parties.

However, centralized sequencers also come with significant drawbacks. They introduce a single point of failure, as the entire system relies on the availability and integrity of the centralized entity. Additionally, users must place their trust in the centralized sequencer, which can potentially lead to censorship or other malicious behaviors.

2. Decentralized Sequencers

In contrast to centralized sequencers, decentralized sequencers distribute the sequencing responsibilities across a network of nodes or validators. This approach offers several advantages, including enhanced security, censorship resistance, and reduced trust assumptions. With a decentralized sequencer, no single entity has control over the system, mitigating the risk of a single point of failure or malicious behavior.

These “pros” do not negate the fact that decentralized sequencers also come with their own set of challenges. They are typically more complex to implement and maintain, as they require coordination among multiple parties and consensus mechanisms. Additionally, there may be potential performance trade-offs, as decentralized systems can be slower and less efficient than their centralized counterparts.

3. Shared Sequencer Models

In addition to centralized and decentralized sequencers, there are also shared sequencer models, where a single sequencing service is shared among multiple Layer 2 solutions. This approach aims to strike a balance between the efficiency of centralized sequencers and the security and trust advantages of decentralized sequencers. Shared sequencer models can potentially leverage economies of scale and reduce the overhead associated with maintaining dedicated sequencers for individual Layer 2 solutions.

Prominent Blockchain Sequencer Implementations In Layer 2

When you talk about blockchain sequencers in the web3 ecosystem, Ethereum and rollups come to mind. Let us explore the sequencer implementations we have in the space.

Ethereum's Rollup-centric Roadmap

1. Optimistic Rollups (e.g., Arbitrum, Optimism)

Optimistic Rollups are a type of Layer 2 scaling solution that leverages sequencers to process and batch transactions before submitting them to the Ethereum mainnet. Projects like Arbitrum and Optimism have implemented centralized sequencers to achieve high throughput and low latency while inheriting the security guarantees of the Ethereum blockchain.

2. ZK Rollups (e.g., Starknet, zkSync)

ZK Rollups, on the other hand, utilize zero-knowledge proofs to validate transactions off-chain, reducing the computational burden on the Ethereum mainnet. Platforms like Starknet and zkSync employ sequencers to process and batch transactions, generate validity proofs, and submit these proofs to the Ethereum blockchain.

Other blockchain ecosystems (e.g., Solana, Avalanche, Polygon)

While the Ethereum ecosystem has been at the forefront of Layer 2 scaling solutions and sequencer implementations, other blockchain ecosystems are also exploring and adopting sequencers. For example, the Solana blockchain utilizes a form of sequencing through its leader rotation mechanism (an example being Rome protocol), while Avalanche and Polygon have implemented various Layer 2 solutions that employ sequencers to enhance scalability.

Challenges and Future Developments

1. Scalability vs. decentralization trade-offs

One of the ongoing challenges with blockchain sequencers is navigating the trade-offs between scalability and decentralization. While centralized sequencers offer superior performance and efficiency, they come at the cost of reduced decentralization and increased trust assumptions. Conversely, decentralized sequencers prioritize security and censorship resistance but may sacrifice performance and throughput.

2. Data availability challenges

Another significant challenge faced by sequencers is data availability. As transactions are processed off-chain and batched together, ensuring the necessary data is available for validation and finality on the main chain becomes crucial. Various solutions, such as data availability sampling techniques, are being explored to address this challenge.

3. Composability and interoperability considerations

As the blockchain ecosystem continues to evolve, the need for composability and interoperability between different Layer 2 solutions and sequencers becomes increasingly important. Developers and researchers in the space are exploring ways to enable seamless communication and value transfer between different sequencer implementations, adopting a more interconnected and efficient ecosystem.

4. Emerging technologies and research (e.g., data availability sampling, validium)

The field of blockchain sequencers is rapidly evolving, with ongoing research and development efforts aimed at improving scalability, security, and efficiency. Emerging technologies, such as data availability sampling and validium, are being explored as potential solutions to address data availability challenges and strike a balance between scalability and decentralization.

Conclusion

The advancement of blockchain sequencers would greatly improve the way users interact with protocols onchain. As we dig deeper we are sure to uncover a plethora of ideas and solutions that would lead to increased ease in building, interaction, and onboarding.

📈 Data

Total Value Locked on L2s Approaches $50 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

Welcome to the vanguard of layer 2 innovation! Today, we embark on a journey through the latest developments reshaping the landscape of blockchain scalability. From groundbreaking solutions to emerging trends, join us as we explore the ever-evolving world of layer 2 protocols.

StarkWare, the primary developer firm behind the layer 2 blockchain, Starknet unveiled plans on Wednesday for its Zero-Knowledge rollup, designed to be compatible with the Ethereum Virtual Machine. This implementation, known as a zkEVM called Kakarot, is currently undergoing testing and will soon be accessible through Starknet’s Stack which is a set of software tools that make it easier for developers to spin up their own customized application-specific chains.

Meanwhile, as at the time of writing, Ethereum’s layer 2 tokens, including Arbitrum (ARB), Optimism (OP), and Starknet (STRK), witnessed significant price surges, with ARB rising by 20%, and OP, STRK doing over 10% as well. These gains can be attributed to the recent approval of Spot ETH ETF and we might see more movements in the market over the coming days and weeks.

As we look into this week's exploration of layer 2 advancements, the horizon of blockchain scalability appears to be brighter than ever. Be sure to keep exploring, keep innovating, and keep pushing the boundaries of what's possible in the decentralized world.

Contributors: Ritaakubue, Melasin, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

🧑‍💻 zkSync Protocol Upgrade v24: New Precompiles, More Blobs, Validiums, and More

🆕 Welcoming L3s to the Superchain

👛 Scroll Gets Integrated Into Trust Wallet

🪂 The Taiko Token Airdrop is Here

⭕ Optimism Launches the Reto Funding App by Agora

🌱 Starknet Launches the Seed Grant Program

🖼️ Farcaster Integrates Arbitrum

🔥 Hot News

Retro Public Goods Funding Round 4 Is Live🔥

Attention Blockchain Pioneers! Retro Public Goods Funding Round 4 by Optimism is live, with a massive 10 million OP up for grabs. This round is exclusively dedicated to the fearless on-chain builders who have deployed smart contracts across the Superchain, generating unparalleled demand for its blockspace.

If you're one of these blockchain OG's, seize this golden opportunity and submit your application before June 6th, 19:00 UTC.

For more information, check out the thread by clicking the link below.

Showcase your on-chain prowess and secure a share of the 10 million OP bounty!

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Pilot Phase: Arbitrum Venture Initiative

• Establish a Short Term Marketing Program

Optimism

• Protocol Upgrade #7: Fault Proofs

Polygon

• Heimdall v1.0.6 Mainnet Release for Validator Nodes

Launching Into the Arbitrum Orbit

Author: Kornekt

Arbitrum Orbit, developed by Offchain Labs, is a rollup development kit for building highly customizable chains. It harnesses the power of Arbitrum Nitro to create a ground for crafting tailored layer 2 and even layer 3 blockchains. Picture it as a canvas where developers can unleash their creativity and build chains that resonate with their vision.

Permissionlessness is one thing that gives Arbitrum Orbit an edge. However, what sets it apart isn't just its open-door policy; it's the boundless possibilities it offers for customization. Developers aren't constrained by one-size-fits-all solutions; instead, they have the liberty to tailor every aspect of their chains to suit their specific needs and preferences. Arbitrum Orbit takes the idea of scalability up a notch by offering the technology that streamlines the creation of EVM-compatible L2 chains and even L3 chains (and beyond) that settle on Arbitrum One or any other Ethereum L2.

Elements of the Orbit

Arbitrum Orbit offers a remarkable level of customization, allowing users to tailor their blockchain networks according to their specific needs and preferences across three crucial dimensions: technology stack, security models, and features.

1. Technology Stack: Users have the flexibility to design their blockchain networks with a technology stack that best suits their requirements. Whether they prefer a specific consensus mechanism, data availability layer, precompiles, or governance mechanism, Arbitrum Orbit provides the freedom to customize these fundamental components.

2. Security Models: Arbitrum Orbit allows users to define and implement security models that align with their risk tolerance and use case requirements. The platform supports various consensus algorithms and validation mechanisms, empowering users to build secure and resilient blockchain networks tailored to their unique security considerations.

3. Features: In addition to customizing the underlying technology and security architecture, users can enhance their blockchain networks with a wide range of features and functionalities. Whether it's support for specific transaction types, interoperability with other blockchain networks, or integration with external systems and services, Arbitrum Orbit provides the flexibility to incorporate these features seamlessly. This empowers developers to create versatile and innovative blockchain solutions that address diverse use cases and requirements.

Rollup or AnyTrust Chains?

Arbitrum Orbit allows users to choose between Rollup and AnyTrust chains, providing them with distinct advantages and trade-offs depending on their specific requirements and use cases.

1. Rollup Chains: Rollup chains leverage the security of the Ethereum mainnet while offloading transaction processing and data storage to a secondary layer. This approach offers significant scalability improvements by aggregating multiple transactions into a single batch and submitting a succinct proof of their validity to Ethereum. Rollup chains provide high-security guarantees as all transactions are ultimately settled on the Ethereum mainnet, benefiting from its robust consensus mechanism and decentralized network of validators.

2. AnyTrust Chains: AnyTrust chains, on the other hand, prioritize flexibility and customization, allowing users to design their consensus mechanisms and security models tailored to their specific needs. While AnyTrust chains may sacrifice some of the security guarantees provided by Rollup chains, they offer greater freedom in designing governance structures, consensus algorithms, and validation mechanisms. AnyTrust chains can be particularly suitable for applications that prioritize performance, efficiency, or specialized use cases that may not be well-suited to Ethereum's mainnet constraints.

Ultimately, the choice between Rollup and AnyTrust chains depends on factors such as security requirements, performance considerations, governance preferences, and interoperability needs. Arbitrum Orbit empowers users to make informed decisions based on their unique priorities, providing the flexibility to select the chain architecture that best aligns with their goals and objectives.

Arbitrum Orbit Vs. Optimism Superchain

Arbitrum Orbit and Optimism Superchain represent two innovative approaches to scaling Ethereum and fostering the development of decentralized applications (dApps) within the blockchain ecosystem. While both platforms share a common goal of enhancing scalability, throughput, and usability for Ethereum-based applications, they employ distinct architectural designs and operational models to achieve their objectives.

Arbitrum Orbit, as a permissionless platform for creating customizable chains, emphasizes flexibility, extensibility, and ease of deployment. This decentralized approach empowers developers to experiment with various configurations, consensus mechanisms, and governance structures, fostering innovation and diversity within the blockchain ecosystem. Arbitrum Orbit's focus on customization and permissionless innovation distinguishes it as a versatile platform capable of accommodating a wide range of use cases, from financial services and gaming to supply chain management and decentralized finance.

On the other hand, Optimism Superchain embodies a vision of interoperability and composability, seeking to integrate disparate L2 solutions into a unified "superchain" ecosystem. By linking L2 networks and facilitating seamless communication between them, Optimism Superchain aims to create a scalable and interoperable infrastructure capable of supporting a diverse array of decentralized applications and use cases.

Unlike Arbitrum Orbit's emphasis on permissionless innovation, Optimism Superchain prioritizes standardization, compatibility, and network effects, envisioning a future where developers can easily deploy and interconnect L2 solutions across a unified network architecture. Through collaboration with industry stakeholders and strategic partners, Optimism Superchain aims to establish itself as a foundational layer for web3 applications and services, driving widespread adoption and mainstream acceptance of decentralized technologies. The uniqueness of Arbitrum Orbit and Optimism Superchain lies in their respective approaches to scalability, interoperability, and decentralization.

Deeper Into the Orbit

Arbitrum Orbit offers an innovative approach to building scalable chains. Its array of scalable features, composability, and customizability empowers developers to forge the future of decentralized technology. If you want to dive deeper and explore the orbit better, check out the Arbitrum Docs.

📈 Data

Total Value Locked on L2s Approaches $50 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

Welcome back to the L2 Review.

Recent analysis has it that Base remains the key draw for fresh investments. This week, Base received over 6,500 ETH in net deposits, outpacing Arbitrum and Optimism by a significant margin. This suggests that investors prefer Base for deploying their capital, possibly because of its established infrastructure or its assumed dependability, despite the growing interest in Layer 2 scaling solutions overall.

Arbitrum, on its end, is making a mark in history as the first L2 to surpass the $150 billion total transaction volume on DEX with a TVL of $2.64 billion, solidifying its position as the largest layer 2 by TVL. With this, many projects are integrating Arbitrum to benefit from its scalability and lower fees.

In this issue’s editorial, we explore a not-so-familiar topic captured in this newsletter, the Bitcoin Layer 2. What is brewing? What is the cause of the latest surge? What are some of its shortcomings? All these and more. It felt good putting this together, but we’d love to know what you think about it. If you are interested in these kinds of posts, kindly let us know in the poll after the article.

Truly, one thing is certain, layer 2 solutions continue to transform the landscape of decentralized applications. Stay tuned and keep your eyes peeled for the latest updates, as the evolution of blockchain technology continues to unfold.

Contributors: Ritaakubue, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

♾️ Ethernity Introduces the Ethernity Chain, an ETH Layer 2 with enhanced AI-driven security

🆕 OMI Has a New BASE

💰 Arbitrum surpasses $150 billion in total transaction volume on Uniswap

🚀 Blur Goes Live on Blast

🔥 Hot News

ZKM Unveils Revolutionary Bitcoin Layer 2 Network After $5M Funding Success

ZKM has announced plans to launch a groundbreaking Bitcoin Layer 2 network following a successful $5M Pre-funding round.

The funding round, led by OKX Ventures and supported by prominent investors like Polygon Ventures, Crypto.com, Amber Group, and others, paves the way for ZKM to introduce the first implementation of its zkVM-based Entangled Rollup interoperability network.

At the heart of this Layer 2 solution lies a unique security framework that introduces a native BTC Multisig script control and decentralized transaction execution verified by BTC scripts. Notably, it employs an 'Optimistic Challenge Process' to secure off-chain computations, ensuring robust security and transparency.

Backed by the Entangled infrastructure, including a general-purpose zkVM and decentralized sequencers, ZKM's Layer 2 network not only guarantees native security but also provides sustainable yield without requiring asset locking. This is a game-changer for Bitcoin investors.

To showcase its commitment to the Bitcoin community, ZKM will sponsor and participate in the upcoming Bitcoin Asia conference in Hong Kong from May 9-10, one of the world's biggest Bitcoin events. Additionally, ZKM will co-host the Bitcoin Dragonland Fest on May 8, providing attendees with an opportunity to learn more about the Layer 2 network and sustainable yield generation from BTC assets without staking, secured by ZKM's state-of-the-art zkVM.

If you are interested in learning more, check out the tweet below.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Arbitrum Multi-sig Support Service (MSS)

Bitcoin Runes and the Layer 2 Surge

Author: Kornekt

In the ever-evolving landscape of blockchain technology, innovation continues to push the boundaries of what's possible. Runes is the latest protocol making waves on the Bitcoin ecosystem. Spearheaded by Casey Rodarmor, the mind behind Ordinals, Bitcoin Runes promises to revolutionize the concept of fungible tokens within the Bitcoin ecosystem.

At its core, Bitcoin Runes leverages Bitcoin’s native UTXO transaction model to create and manage fungible cryptocurrencies seamlessly. Token issuance, transfer, and storage are performed efficiently, with minimal impact on the underlying Bitcoin blockchain. By assigning messages to UTXOs via OP_RETURN, Runes ensures secure and transparent transactions without the need for off-chain data storage.

The launch of the Runes protocol coincided with Bitcoin's fourth halving, marking a significant milestone in the evolution of the Bitcoin ecosystem. This synchronized launch triggered a frenzy of activity, with users flooding into the Bitcoin blockchain to mint Rune tokens. Few days after launch, Runes accounted for about 68% of all Bitcoin transactions. As a result, Bitcoin transaction fees surged due to stiffer competition for blockspace. All these highlight the need for further scaling of the Bitcoin network.

Why Bitcoin Needs L2 Solutions

Despite its unmatched security and decentralization, Bitcoin grapples with inherent shortcomings that necessitate the existence of layer 2 solutions on the network.

First and foremost, Bitcoin's scalability has long been a subject of debate and concern. The network's limited throughput, capped at a mere six to eight transactions per second, pales in comparison to the transaction speeds offered by traditional payment systems and even some of its blockchain counterparts. This bottleneck often results in congested blocks and soaring transaction fees during periods of high demand, deterring users from engaging with the network for everyday transactions.

Moreover, Bitcoin's base layer lacks the flexibility to support complex smart contracts and decentralized applications (dApps). Unlike platforms like Ethereum, which embrace Turing-complete scripting languages, Bitcoin's scripting capabilities are limited. This constraint stifles innovation and hampers the development of novel use cases beyond simple value transfer.

Bitcoin layer 2 networks hope to scale the network by introducing innovative solutions that resolve these challenges. Let's delve into some popular layer 2 solutions on the Bitcoin network and explore how they function.

Lightning Network (LN)

The Lightning Network is arguably one of the most well-known layer 2 solutions for Bitcoin. It operates as a network of payment channels built on the Bitcoin blockchain. Users can open payment channels with each other, conduct off-chain transactions, and settle them on the Bitcoin blockchain when necessary. This enables instant micropayments with reduced transaction fees. LN leverages smart contracts and multi-signature wallets to ensure security and trustlessness in transactions.

Liquid Network

Liquid is a sidechain built by Blockstream, offering fast and confidential transactions for Bitcoin and other digital assets. It operates as a federated sidechain, meaning it relies on a group of trusted entities to validate transactions. Liquid supports the issuance of tokenized assets, such as stablecoins and security tokens, while providing fast settlement times of fewer than two minutes. Confidential Transactions and Confidential Assets features enhance privacy by obscuring transaction amounts and asset types.

While Lightning Network and Liquid Network are among the most prominent layer 2 solutions on Bitcoin, several other projects are also exploring off-chain scaling solutions. Projects like RSK, Rootstock, and Stacks (formerly Blockstack) are experimenting with different approaches to enhance Bitcoin's scalability.

Bitcoin L2 vs. Ethereum L2

Underlying Blockchain

• Bitcoin L2 solutions operate on the Bitcoin blockchain, renowned for its security, decentralization, and robustness.

• Ethereum L2 solutions, on the other hand, leverage the Ethereum blockchain, known for its smart contract capabilities and vibrant decentralized finance (DeFi) ecosystem.

Use Cases and Applications

• Bitcoin L2 solutions primarily facilitate fast and low-cost payments, microtransactions, and asset tokenization within the Bitcoin ecosystem.

• Ethereum L2 solutions cater to a broader range of applications, including decentralized exchanges (DEXs), non-fungible tokens (NFTs), DeFi protocols, and gaming platforms, leveraging Ethereum's programmability and smart contract capabilities.

Community and Adoption

• Bitcoin L2 solutions benefit from a robust and longstanding community of Bitcoin enthusiasts, developers, and businesses, contributing to their adoption and development.

• Ethereum L2 solutions thrive within Ethereum's vibrant ecosystem, buoyed by a diverse community of developers, DeFi projects, and decentralized applications (dApps).

Bitcoin Layer 2 Shortcomings

1. User Experience and Accessibility: Although L2 solutions aim to provide faster and cheaper transactions compared to on-chain transactions, the user experience can still be cumbersome for non-technical users. Setting up payment channels, managing channel liquidity, and understanding routing mechanisms can deter mainstream adoption and limit accessibility to L2 networks.

2. Interoperability and Network Fragmentation: The lack of interoperability between different Bitcoin L2 solutions and other blockchain networks hampers seamless asset transfers and cross-platform interactions. This fragmentation of the network ecosystem can lead to inefficiencies and siloed liquidity pools, hindering the growth of Bitcoin's broader DeFi ecosystem.

3. Security and Trust Model: While L2 solutions inherit the security properties of the underlying Bitcoin blockchain, they introduce additional layers of complexity and potential attack vectors. Issues such as channel breaches, routing attacks, and protocol vulnerabilities pose security risks that must be addressed through rigorous testing, audits, and continuous development efforts.

Conclusion

Relentless innovation and collaborative efforts within the cryptocurrency community continue to push the boundaries of what is possible on the Bitcoin network. With ongoing developments in layer 2 technology, coupled with a growing ecosystem of applications and services, the future of Bitcoin's layer 2 ecosystem looks promising.

📈 Data

Total Value Locked on L2s closes in on $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

In recent months, we have dwelled heavily on major protocol and onchain upgrades. From Ethereum’s Dencun upgrade to Optimism’s fault proofs, we have highlighted their importance, challenges, and some updates to come.

In this issue, we are drifting a bit from software updates to more public goods-related subjects. However, with the Optimism Superchain being the topic of interest, you can say we are still along the software borders.

The Optimism Retro Funding Round 4 is here. 10 million OP has been dedicated to rewarding Superchain builders with applications opening in May. Public goods funding has become a very important aspect in web3 and protocols like Optimism have been at its center. After discussions in moving from broad to more narrow-scoped rounds, we would be witnessing its first iteration with this round.

In this issue’s editorial, we give a TL;DR into the Superchain vision. Stay strong, stay optimistic, and we hope you have an amazing read. See you in two weeks frens!

Contributors: Warrior, jengajojo, Tonytad, anointingthompson1, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

Share

🗞️ Ecosystem Updates

⛓️ Celo Developer cLabs Proposes Using OP Stack to Launch Ethereum Layer 2 Chain

🆕 Worldcoin to Have its own Layer 2 Blockchain Called World Chain

🔀 OKX Launches new Layer 2 on Mainnet, Aims to Bring 50 Million Users Onchain

➿ Seamless Protocol Launches Altcoin-specific DeFi Lending Market on Base

⚡Offchain Labs Releases Arbitrum BOLD on Testnet

⭕ DePIN Project SendingNetwork Raises $7.5 Million From Balaji Srinivasan and Others

🔥 Hot News

Celo Celebrates 4 Years and Gears Up for Major Upgrade

It's a party over at the Celo camp! The mobile-first, EVM-compatible blockchain has passed the four-year mark today, and they're not just blowing out candles. Nope, the Celo team has a massive surprise in store for the web3 ecosystem.

On this milestone anniversary, cLabs, the team behind Celo, has dropped a bombshell proposal stating their plan to migrate the entire Celo blockchain to an Ethereum Layer 2 solution. However, it is not just any L2, but one built using the battle-tested OP Stack from Optimism.

Now, this isn't a decision they've taken lightly. The Celo community unanimously voted in favor of exploring L2 options, and cLabs has been rigorously testing and evaluating contenders like Polygon CDK, Arbitrum Orbit, and ZK Stack. They even implemented the Gingerbread Hardfork to pave the way for the eventual transition, dubbed #CEL2.

After weighing factors like time to production and Ethereum alignment, cLabs has settled on the OP Stack as the clear winner and it's not hard to see why. This solution promises to maintain all the unique features that make Celo stand out, like 1-block finality, low gas fees, and the ability to send money using a phone number or email address.

By leveraging the OP Stack, Celo is set to receive a massive performance boost. We're talking about a 50% increase in throughput and a slashing of block times from 5 seconds down to a blistering 2 seconds. Also, let's not forget the added security of bridging directly to the Ethereum network.

If the Celo community gives the green light, cLabs could have #CEL2 up and running on testnet as early as Summer 2024.

For all the juicy details, head to the Celo Forum and check out the proposal and discussions. This is one upgrade you don't want to sleep on!

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• Arbitrum Treasury Token Swap Program

• GovHack at ETH CC (Brussels)

• AIP: BOLD - permissionless validation for Arbitrum

• Temperature Check: Change Arbitrum Expansion Program to allow deployments of new Orbit chains on any blockchain

• AIP: Nova Fee Router Proposal

• AIP: Support RIP-7212 for Account Abstraction Wallets

Optimism

• Retro Funding 4: Onchain Builders - round details

Polygon

• PFP-1: Polygon Funding Proposal Framework

Starknet

• Starknet’s builder council - Description & up to date list of members

Celo

• cLabs Proposes Migrating Celo to an Ethereum L2 leveraging the OP Stack

OP’s Superchain Vision

Author: Kornekt

The Optimism Collective is facilitating an ecosystem of composable and interoperable L2 networks built using the OP Stack — a comprehensive technology that streamlines the creation of L2 chains. At its core, the OP Stack provides a standardized framework for implementing essential components such as data availability, sequencing, execution, settlement, and governance layers essential for rollups.

The Collective's vision is not just for the OP stack to be used to build several individual chains, instead, the idea is to foster a unified multi-chain ecosystem — the “Superchain”. Worldcoin and Celo are some of the latest protocols looking to build on the OP stack, on a mission to be a part of the Superchain. What’s this Superchain all about? Let’s find out!

Into the Superchain

The Superchain represents a significant evolution beyond isolated rollups by transforming them into a network of interconnected chains, each contributing to a unified ecosystem. Unlike traditional single rollups which operate independently, the Superchain fosters collaboration and interoperability.

Within the Superchain, OP Chains (protocols built on the OP Stack) utilize the OP Stack as a shared foundation, ensuring a consistent and standardized approach to building rollups. This shared foundation enables OP Chains to benefit from a common security model, streamlined communication and simplified bridging mechanisms. Instead of each rollup chain operating in isolation, they become part of a cohesive network, sharing resources and capabilities.

One of the key objectives of the Superchain is to facilitate seamless interaction and interoperability among OP Chains. The Superchain enables frictionless cross-chain transactions and data transfer by establishing standardized protocols and communication channels. Users can seamlessly move assets and information across different OP Chains, experiencing a unified and interconnected ecosystem similar to navigating a single chain.

Ultimately, the emphasis on seamless interaction within the Superchain not only improves user experience but also unlocks new possibilities for decentralized finance, gaming, and other blockchain-based applications. It paves the way for a future where blockchain technology is accessible, user-friendly, and capable of supporting a wide range of use cases.

Why Superchain?

Here’s an overview of some of the specific advantages that the Superchain vision brings:

Effective Ethereum Scaling

The Superchain achieves effective scaling of Ethereum by horizontally scaling the network, thereby mitigating the bottlenecks associated with single rollup solutions. Unlike traditional vertical scaling, which involves increasing the capacity of individual nodes or components, horizontal scaling focuses on adding more nodes or components to the network.

In the context of the Superchain, this means expanding the network by integrating multiple OP Chains, each operating as a scalable rollup solution. By utilizing the OP Stack, developers can easily create customized chains tailored to specific use cases, effectively scaling Ethereum's capacity to handle diverse workloads.

Furthermore, by interconnecting these OP Chains within the Superchain, the network gains the ability to process transactions in parallel across multiple chains. This parallel processing capability significantly increases throughput and reduces latency.

Composability and Interoperability

One of the major problems still facing the L2 ecosystem is the issue of interoperability between the available L2 networks. Optimism’s Superchain hopes to eliminate this hurdle by making assets and information move freely between interconnected OP Chains. This interoperability is facilitated by the shared foundation provided by the OP Stack. As a result, dApps built on different OP Chains can interact with each other seamlessly, leveraging the unique features and capabilities of each chain to enhance their functionality.

The modular architecture of the OP Stack allows developers to create specialized OP Chains tailored to specific use cases or applications. By deploying dApps on these specialized chains, developers can take advantage of the scalability and performance benefits offered by the Superchain while maintaining interoperability with other chains in the network.

Developer Innovation

The Superchain fosters developer innovation by promoting the creation of specialized chains tailored to different applications, while still maintaining network-level benefits. Developers have the flexibility to design and deploy OP Chains that are optimized for specific use cases or applications, thanks to the modular architecture of the OP Stack. These specialized chains can be customized with features and configurations that cater to the unique requirements of different dApps.

By combining specialized chains' flexibility with the Superchain ecosystem's interoperability, developers are empowered to innovate and create new types of decentralized applications that offer unique and compelling user experiences. This approach to blockchain development encourages collaboration, experimentation, and the exploration of new use cases, driving the continued growth and evolution of the Superchain ecosystem.

The Decentralized Future

With its emphasis on scalability, interoperability, and innovation, the Superchain concept heralds a new era in blockchain technology. While the Superchain is still a work in progress, its finalization will pave the way for broader adoption, propelling the development of decentralized applications across various industries and unlocking novel possibilities that will drive the decentralized web. For a full breakdown of the technical details associated with the Superchain, check out the Optimism Docs.

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

Is L2 season here or is it still coming?

Base is turning the L2 ecosystem on its head, surpassing $4 billion in total value locked. It has become the third-largest Layer 2 network on Ethereum and still shows no sign of slowing down.

The Layer 2 space continues witnessing rapid evolution, with various solutions competing and collaborating to address Ethereum's scalability challenges and unlock new possibilities.

In this week’s editorial, we dive into Optimism’s fault proof system, highlighting how it enables better security and decentralization. Now live on OP Sepolia, integration into mainnet is not so far away.

With so much happening in the Layer 2 space, there's plenty to dive into. So stay tuned as we continue to explore and uncover the potential of the Layer 2 ecosystem.

Contributors: Ritaakubue, Warrior, anointingthompson1, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

Share

🗞️ Ecosystem Updates

🔒 Base Hits 4 Billion USD in TVL; Now the Third-largest L2 Network on Ethereum.

🧬 LayerAI ZK Layer-2 Testnet 2.0 is Live: LAI Becomes Gas for Transactions.

🪴 Cornucopias Game Expands Into the Fastest-Growing Layer 2 on Ethereum, Base.

🚀 Venture Firm Thesis has Launched a Bitcoin layer-2 network, Mezo.

⛓️ Chainlink Functions Goes Live on Base.

⚡ Swell L2 pre-launch deposits are live

🔥 Hot News

Thesis Unveils Mezo: A Groundbreaking Bitcoin Layer-2 Network Backed by $21 Million Investment

In a significant move aimed at amplifying Bitcoin's capabilities, Thesis, a renowned blockchain venture studio, has emerged from stealth mode with the unveiling of Mezo, an innovative Bitcoin Layer 2 network. This initiative has garnered substantial support, securing a remarkable $21 million investment from a large group of esteemed investors led by the prominent Pantera Capital.

Designed to offer expeditious and cost-effective transactions, Mezo empowers users to seamlessly engage with a growing circular economy, harnessing the full potential of Bitcoin for a comprehensive range of applications. This innovative solution aims to amplify Bitcoin's reach, facilitating the integration of approximately 25% of the global economy – a feat commensurate with the scale of today's U.S. economy.

The platform also enables users to maintain their Bitcoin holdings while simultaneously earning rewards for contributing to the security and stability of the Mezo network.

The Mezo initiative has garnered support from a lot of esteemed investors, including Multicoin, Hack VC, ParaFi Capital, Nascent, Draper Associates, Primitive Ventures, Asymmetric Ventures, Dan Held, and DCF God, underscoring the widespread confidence in Mezo's transformative potential.

To read more about this new development, check out this article.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• https://arbitrumdaonews.substack.com/i/143468365/proposal-non-constitutional-defending-open-source-a-united-stand-for-developer-rights-and-software-freedom

• https://arbitrumdaonews.substack.com/i/143468365/proposal-non-constitutional-funding-dao-legal-defence-and-advocacy-with-defi-education-fund

• https://arbitrumdaonews.substack.com/i/143468365/subsidy-fund-for-security-services

• https://arbitrumdaonews.substack.com/i/143468365/kwenta-x-perennial-arbitrum-onboarding-incentives

Optimism

• https://gov.optimism.io/t/bootcamp-women-in-web3-by-women-biz/7930

Starknet

• https://community.starknet.io/t/qrcode-starknet-transaction-encoding/113885

• https://community.starknet.io/t/starknet-costs-and-fees/113853

Optimism’s Fault Proof Goes Live on Sepolia Testnet

Author: Kornekt

For about two years now, Optimism, a leading Layer 2 scaling solution, has been without a functioning proof system. The fraud proof that was initially launched with the network was later disabled due to security and compatibility concerns. Since then, users have had to trust the network and a centralized security council.

This centralized approach raised significant concerns about the network's security and decentralization. The lack of a functioning proof system has brought widespread criticism of the network, with many pointing out how this creates a fundamental loophole in the system. In response to these challenges, Optimism developed a new mechanism called Fault Proofs which was rolled out on the OP Goerli testnet October last year.

On the path toward the final launch on the Optimism mainnet, the fault proof was deployed on the OP Sepolia testnet on March 19, 2024. This marked a significant milestone for Optimism, as it provided developers and security researchers the opportunity to thoroughly test the system in a simulated environment before its final implementation.

Looking Into the Fault Proof System

Optimistic rollups work with the principle that transactions are assumed valid unless proven otherwise. If someone suspects fraud, they can submit a fraud/fault proof challenging the transaction's validity. The dispute is then resolved, ensuring the transaction's integrity before finalizing it on the mainnet.

Fraud/Fault proofs are crucial for ensuring the security and trustlessness of optimistic rollups, which aim to address Ethereum's scalability challenges. They foster decentralization and security, guarantee eventual finality for valid transactions, and reduce reliance on centralized entities.

Optimism's fault proof system is designed with a particular focus on modularity and permissionless validation. The system comprises three key constituents:

1. Fault Proof Program (FPP): Serving as the system’s backbone, the FPP acts as a verifier by comparing outputs generated on Optimism’s Layer 2 with the original inputs submitted on the Ethereum mainnet (L1). This ensures that computations performed on the L2 chain remain consistent with the data on the main chain.

2. Fault Proof Virtual Machine (FPVM): This component plays a pivotal role in dispute resolution. By allowing the re-execution of the code used to generate L2 outputs, the FPVM verifies the accuracy of transactions and computations on the L2. In case of disputes, this feature provides a mechanism to confirm the validity of transactions.

3. Dispute Game Protocol: Empowering users to challenge potentially fraudulent activity, the Dispute Game Protocol facilitates a collaborative process between challengers and network validators. Users can submit proofs to initiate disputes, and the protocol ensures fair resolution through a consensus mechanism.

Why Launch On Testnet?

Before deploying the fault proof system on the mainnet, rigorous testing on a testnet is imperative for several reasons, let's find out.

• Bug Detection: Testing on a testnet allows developers to identify and rectify any bugs or vulnerabilities in the system before it goes live on the mainnet, ensuring a smoother and more secure deployment.

• Stress Testing: Simulating real-world conditions and high transaction volumes on a testnet helps evaluate the scalability and performance of the fault proof system, ensuring it can handle the expected load on the mainnet.

• Community Feedback: Engaging with the developer community and soliciting feedback during the testnet phase provides valuable insights for optimizing the system and addressing user concerns or usability issues.

• Risk Mitigation: Deploying critical security features like the fault proof system on a testnet allows for controlled experimentation and risk mitigation, minimizing the potential impact of unforeseen issues on user funds and applications.

The successful deployment of the Fault Proof system on the Sepolia testnet represents a crucial step forward for Optimism in enhancing the security and decentralization of its Layer 2 scaling solution for Ethereum.

Mainnet Launch Expectations

In an interview with CoinDesk, Karl Floersch, CEO of OP Labs, hinted that the fault proof would be live on OP mainnet later this year. While the exact launch date remains unconfirmed, post-testnet development will likely focus on further optimization, to fix bugs, improve performance, and collaborate with developers and community members to ensure seamless integration.

The successful deployment of the fault proof on the OP Sepolia testnet marks a significant milestone for Optimism. As development progresses and preparations for the mainnet launch continue, the network moves closer to achieving its goal of providing a secure and decentralized scaling solution for Ethereum.

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

Layer 2 solutions are at the vanguard of scaling Ethereum but right now it turns out not to be just a scaling solution but a revolution. Layer 2 is the buzzword resounding through the Ethereum ecosystem — from the explosive growth of Arbitrum and Optimism and projects like Base built on the OP stack to the emergence of some amazing standards like zkSync and Starknet.

zkSync projects are currently demonstrating the potential for zero-knowledge proofs to revitalize not just DeFi but a wide range of applications, from gaming to supply chain management. Speaking of gaming, Polygon joined forces with Immutable to launch a 100 million USD gaming investment fund. Optimism is also moving as they are back with a more targeted form of RPGF — more on that under the Hot News section.

Indeed, Layer 2 has generally transitioned from a concept of the future to a practical reality solution that enhances efficiency and accessibility in blockchain technology. Sit back as we journey into the latest updates and advancements in this fast-paced L2 space.

Contributors: Ritaakubue, Warrior, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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🗞️ Ecosystem Updates

⛓️ Inscriptions Push Blobs To Reach Set Utilization Limit on Ethereum

🆕 Coinbase To Store More Corporate and Customer USDC Balances on Base as TVL Tops $1 Billion

🔀 Altlayer Enables Token Staking, Unveils Fast Finality Service for Rollups

➿ Spartan Capital Leads $10 Million Strategic Funding Round for Bitcoin Defi Developer ALEX

⚡ Fantom Plans to Leverage Sonic To Build a ‘Shared Sequencer’ for Other Blockchains

⭕ Polygon zkEVM Blockchain Resumes Operation Following 10-Hour Outage

🔒 Ethereum Layer 2 Morph Raises $20 Million From Dragonfly, Pantera and Others

📈 Aavegotchi Chooses Base as Settlement Layer for Gotchichain

🔥 Hot News

850M OP Dedicated to the Evolution of Retro Funding

Optimism has allocated a total of 850M OP tokens to incentivize impactful work across the Optimism Collective and the Superchain. The Retro Funding program has been revamped to operate through specifically targeted and categorized rounds, each rewarding different types of contributions.

Upcoming Rounds and Submission Deadlines:

• May 2024: Onchain Builders (Driving block space demand and network value)

• August 2024: OP Stack (Strengthening core components and foundational elements)

• August 2024: Governance (Improving decentralization, processes, and voting mechanisms)

• October 2024: Dev Tooling (Streamlining development processes and tools)

To assist builders, Optimism has curated Builder Ideas aligned with the Collective's mission, available here.

Optimism emphasizes that Retro Funding is not a charitable endeavor but a system where contributions are valued and rewarded accordingly. By aligning contributions with broader ecosystem goals and providing clarity, Optimism aims to empower builders to shape their future.

For more information on the evolution of Retro Funding, refer to: https://optimism.mirror.xyz/nz5II2tucf3k8tJ76O6HWwvidLB6TLQXszmMnlnhxWU.

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• https://forum.arbitrum.foundation/t/rfc-security-council-member-test/22809

• https://forum.arbitrum.foundation/t/the-opco-scale-structure-synergy/22737

• https://forum.arbitrum.foundation/t/arbitrums-memecoin-fund/22743

Optimism

• https://gov.optimism.io/t/token-house-participation-and-incentives-season-5-cycle-16-19/7852

• https://gov.optimism.io/t/introducing-the-collective-feedback-commission/7863

• https://gov.optimism.io/t/onboarding-op-chains-to-optimism-governance/7858

• https://gov.optimism.io/t/upcoming-retro-rounds-and-their-design/7861

Celo

• https://forum.celo.org/t/draft-celo-public-goods-grant-request-update-rwa-focused-accelerator-with-outlier-ventures/7739

• https://forum.celo.org/t/current-celo-governance-overview-procedures/7735

Ethereum's Layer 2 – Post Dencun

Author: Kornekt

Following the implementation of EIP-4844, referred to as Proto-danksharding, we've seen drastic reductions in fees on Layer 2 networks. This reflects the positive impact of the upgrade on Ethereum's overall scalability and cost-effectiveness. Gas fees on Optimism, Arbitrum, and other major L2 networks have been reduced by over 90%, making transactions more affordable and accessible to a broader user base. These fee reductions have encouraged greater participation in decentralized applications and DeFi protocols built on Layer 2, fostering innovation and growth within the L2 ecosystem.

All these are thanks to the introduction of blobs, which serve as temporary storage systems for large data packets in the consensus layer, reducing the overall storage burden and transaction costs associated with Layer 2 operations. The temporary nature of these blobs seems to raise eyebrows because it sort of contradicts the idea of immutability and permanence associated with blockchain technology. However, it is essential to understand that blobs live on Ethereum’s consensus layer and all that’s necessary is to ensure they are there long enough for all participants to verify their validity. As such, the data can be deleted after specified periods but may still be available on other off-chain storage solutions.

Since rollups are the major beneficiaries of the Dencun upgrade, now would be a good time to go back to certain basics to understand how rollups inherit mainnet security.

How Rollups Derive Security From Ethereum Layer 1

Rollups scale Ethereum by leveraging the security guarantees provided by Ethereum Layer 1 while significantly improving transaction throughput and efficiency. At the heart of the rollups lies the fundamental principle of anchoring transaction data and state updates to the Ethereum main chain, ensuring the integrity and security of Layer 2 operations.

The security model of rollups is derived from Ethereum Layer 1, which serves as the ultimate arbiter of truth and the source of trust for all transactions and smart contract executions. Rollups inherit the robust consensus mechanism of Ethereum Layer 1, relying on its decentralized network of validators to validate and confirm transactions submitted to the L2 network.

Transactions processed on Layer 2 are batched and compressed as blobs, which are then submitted to Ethereum Layer 1 for verification on the blockchain. This process ensures that all Layer 2 transactions are ultimately secured by the underlying Ethereum network, providing users with the same level of security and truthfulness as mainnet transactions.

Furthermore, rollups incorporate additional security mechanisms to further enhance the integrity and reliability of Layer 2 operations. One such mechanism is the use of fraud proofs or validity proofs, which allow users to challenge invalid transactions or state transitions by providing cryptographic evidence of fraudulent behavior.

Moreover, rollups benefit from Ethereum's economic security model, which incentivizes validators to act honestly and follow the protocol rules. Validators are required to stake a certain amount of cryptocurrency as collateral, which they stand to lose in the event of malicious behavior or non-compliance with the protocol.

Future of Ethereum Scaling – Full Danksharding

Dencun was only a precursor for the future of Ethereum scaling which involves full Danksharding. Full Danksharding expands Proto-danksharding by increasing the number of blobs per block from 1 to 64. This substantial increase in data blobs allows Ethereum to process a significantly higher volume of transactions.

With full Danksharding, users can expect faster confirmation times and lower fees, making Ethereum even more accessible and affordable for a broader audience. While scalability and efficiency are paramount, full Danksharding prioritizes security and decentralization. The upgrade maintains Ethereum's robust security model by incorporating mechanisms for data availability sampling and proposer-builder separation.

Data availability sampling ensures that transaction data remains accessible and verifiable across the network, preventing data manipulation or censorship attacks. Similarly, proposer-builder separation mitigates the risk of collusion or manipulation by separating the roles of block proposal and construction.

By upholding these security measures, full Danksharding ensures that Ethereum remains resilient against potential threats while scaling to meet the demands of a growing user base and ecosystem.

Wrapping It All Up

The Dencun upgrade represents a significant milestone in Ethereum's journey towards scalability and efficiency. With lower fees on Layer 2, the introduction of blobs, and the assurance of rollup security derived from Ethereum Layer 1, Ethereum is poised for a future of enhanced performance and accessibility. As we look forward to future upgrades like full Danksharding, Ethereum continues to solidify its position as a leading force in the blockchain space, driving innovation and paving the way for the decentralized future.

📈 Data

Total Value Locked on L2s is almost $40 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

🔥 L2 Fees and Costs Update

Transaction Fees as of March 28, 2024:

The Dencun upgrade went live yesterday and is a major milestone for Ethereum, being the largest upgrade since the network switched to Proof-of-Stake (PoS). This upgrade has significantly changed how data is stored on Ethereum, making it more accessible and cheaper to record L2 transactions. This has led to a drastic fall in transaction fees on several Layer 2 networks. In this issue’s editorial, we dig deeper into the Dencun upgrade and the fresh momentum it brings to Ethereum’s Layer 2.

This momentum is not only limited to the Ethereum L2 ecosystem. The Bitcoin Layer 2 ecosystem is also taking huge strides with native Bitcoin-based applications seeing increased interest and usage. The emergence of projects like Stacks, Rootstock, and Liquid, which use Bitcoin as a foundational settlement layer while scaling functionality, has contributed to this growth. The Stacks network, a companion chain for smart contracts built on Bitcoin, witnessed its Total Value Locked (TVL) break previous all-time highs, indicating strong adoption and usage of the network.

These updates suggest that the Layer 2 ecosystems, both for Bitcoin and Ethereum, are experiencing significant growth and adoption, with new projects and solutions being developed to address the inherent limitations of the underlying networks. The increasing interest in native Bitcoin-based applications and the growth of Ethereum's Layer 2 projects indicate a positive trend for the overall ecosystem.

Read on to get the latest updates, and keep yourself abreast of major L2 stories and news.

Contributors: Warrior, Lucent1, anointingthompson1, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

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Share

🗞️ Ecosystem Updates

⛓️ Swell Plans Layer 2 'Restaked Rollup' Alongside Native Governance Token

🆕 Blobs Unleashed: Ethereum’s Dencun Upgrade Activates on Mainnet

🔀 Eclipse Labs Raises $50 Million in Series A Funding Ahead of Expected Q2 Mainnet

➿ Injective inEVM Layer 2 Launches on Mainnet, Targeting More Ethereum, Cosmos and Solana Collaboration

⚡ Taiko Raises $37M to Date From Top-tier VCs Ahead of Mainnet Launch

⭕ Frax Opens Bridge Access to Layer 2 Network Fraxtal; Plans Reward Snapshot Today

🔒 Base Says it Will Support EIP-4844 From 'Day 1' Following Dencun Upgrade

📈 Starknet Optimizes Code for Cost Savings Following Dencun Upgrade

🔮 Ethereum Layer 2 Chain Blast Releases Official Mainnet

🔥 Hot News

Grass Announces Revolutionary Layer 2 for Unbiased AI Training Data

Grass has announced its plans to become the world's first Layer 2 Data Rollup and is set to revolutionize the AI industry. Grass plans to do this by leveraging Solana's high throughput to process a staggering 1 million transactions per second, settling the platform securely on the Solana blockchain.

At the core of Grass' mission is addressing the consistent issue of bias in AI models, stemming from the lack of transparency surrounding the training data used. Grass' innovative solution is to establish an immutable ledger that allows developers to verify the origin of training data beyond a reasonable doubt, which, in turn, will ensure the absence of bias.

Grass' trailblazing Layer 2 solution promises to usher in a new era of unbiased AI models, fostering trust and transparency within the industry. Read more about this development in the thread below 👇🏽

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• https://forum.arbitrum.foundation/t/catalyze-gaming-ecosystem-growth-on-arbitrum/22368

• https://forum.arbitrum.foundation/t/double-down-on-stip-successes-stip-bridge/22353

Optimism

• https://gov.optimism.io/t/retro-funding-moving-from-broad-to-narrow-scoped-rounds/7759

• https://gov.optimism.io/t/the-path-to-open-metagovernance/7728

• https://gov.optimism.io/t/retro-citizen-rewards-retro-funding-3/7758

Polygon

• https://forum.polygon.technology/t/account-abstraction-proposals-comparison/13595

• https://forum.polygon.technology/t/upcoming-zkevm-mainnet-beta-elderberry-upgrade-fork-id-8/13641

Starknet

• https://community.starknet.io/t/starknet-v0-13-1-pre-release-notes/113664

• https://community.starknet.io/t/universal-sierra-compiler-usc/113702

Mantle

• https://forum.mantle.xyz/t/passed-mip-29-ef-proposal-second-capital-call-and-updates/8653

Ethereum's Blobs Are Slashing L2 Fees

Author: Kornekt

The Ethereum network has just undergone its biggest upgrade since the Merge. At exactly 13:55 UTC on March 13, 2024, the Dencun upgrade went live on the Ethereum mainnet. This upgrade, named from a combination of the Cancun and Deneb updates, accounts for nine Ethereum Improvement Proposals.

Set to redefine transaction processing capabilities, Dencun heralds a new era of scalability for Ethereum. One major takeaway of this upgrade is the introduction of data “blobs”, also known as Proto-Danksharding, which greatly reduces the burden of data storage costs for Layer 2 transactions. Let’s find out more!

What is Proto-Danksharding?

At the heart of the Dencun upgrade lies Proto-Danksharding, a paradigm shift in Ethereum's approach to data storage and transaction processing, particularly concerning Layer 2 solutions. Proto-Danksharding addresses the pressing issue of exorbitant data storage costs inherent in Layer 2 transactions on Ethereum's mainnet.

Traditionally, Layer 2 solutions, such as Rollups, have grappled with the necessity of permanently storing transaction data on Ethereum's mainnet, resulting in substantial storage expenses passed on to users in the form of transaction fees. Proto-Danksharding presents a groundbreaking solution by introducing temporary "data blobs" to the Ethereum network.

These data blobs serve as transient repositories for transaction data, enabling Layer 2 solutions to offload their storage requirements from Ethereum's mainnet to these ephemeral storage spaces. In stark contrast to conventional storage methods, where data remains on-chain indefinitely, data blobs have a finite lifespan of approximately one month before automatic deletion.

In addition to the data in the blobs, rollups post a “commitment” onchain which is used to verify the validity of the blob data. The data only need to be available long enough for anyone to check and verify their validity. As such, the data don't need to live perpetually on the network. This makes it okay to delete the data blobs after the specified period.

By transitioning transaction data to these temporary data blobs, Proto-Danksharding significantly mitigates the storage costs associated with Layer 2 transactions. This cost reduction translates to tangible benefits for users, in the form of lower transaction fees and enhanced accessibility to decentralized applications. Furthermore, Proto-Danksharding lays the groundwork for full Danksharding, which aims to augment Ethereum's scalability through additional data-sharding techniques.

Significance of Dencun on Ethereum and Layer 2

Dencun holds profound significance for both the Ethereum network and Layer 2 scalability. By introducing pioneering concepts like Proto-Danksharding, Dencun addresses critical challenges related to data storage costs and transaction fees, laying the groundwork for enhanced scalability and efficiency.

For Ethereum, Dencun signifies a pivotal step toward realizing long-term scalability objectives. Dencun amplifies the network's capacity to process higher transaction volumes by optimizing data storage and reducing transaction fees.

Proto-Danksharding's introduction by the Dencun upgrade also marks a watershed moment for the Layer 2 ecosystem on Ethereum's mainnet. A further highlight of some of its benefits on the Layer 2 ecosystem is as follows:

• Introduction of Temporary Data Blobs: Unlike conventional storage methods, data blobs have a finite lifespan, ensuring efficient resource allocation and minimizing storage overheads. Proto-Danksharding introduces temporary "data blobs" tailored for storing transaction data from Layer 2 solutions, mitigating the need for permanent on-chain storage.

• Reduced Storage Costs: Proto-Danksharding's utilization of temporary data blobs substantially lowers the storage costs associated with Layer 2 transactions, fostering a more cost-effective ecosystem for users.

• Enhanced Accessibility: Lower transaction fees resulting from reduced storage costs make decentralized applications built on Layer 2 solutions more accessible and affordable, driving widespread adoption and innovation.

With diminished costs and heightened efficiency, Layer 2 platforms are poised to attract a burgeoning community of users and developers, fostering innovation and vitality within the ecosystem.

To Conclude

The potential long-term impact of the Dencun upgrade on the blockchain ecosystem is profound. By addressing scalability challenges and streamlining transaction costs, Dencun serves as a harbinger of future upgrades aimed at bolstering network efficiency and accessibility. This trajectory could catalyze the global adoption of blockchain technology, heralding a global era of decentralization, innovation, and inclusivity.

🔭 Project Watch

Arbitrum

Top Projects by TVL in the Last 7 Days

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL in the Last 7 Days

The bull is tightening its rein on the market, and as expected we are seeing gas fees on Ethereum soar. This and many other issues reinforce Layer 2 solutions' crucial role in this path toward global adoption. Despite challenges like centralization and interoperability issues, with over $30 billion in total value locked, Layer 2 momentum remains strong, driving innovation and growth within the ecosystem.

In our previous issue, Kornekt explored the rollup stages, emphasizing the maturity framework inspired by Vitalik Buterin, categorizing rollups into Stage 0, Stage 1, and Stage 2. Stage 0 projects like Optimism post all transactions on-chain, while Stage 2 projects allow permissionless fraud proofs and time-locked upgrades for user security.

This week, we take a peek at the tech behind optimistic rollups. Optimistic rollups are Layer 2 protocols that enhance Ethereum's scalability by processing transactions off-chain, reducing computation on the main chain. They rely on Ethereum's security by publishing transaction results on-chain.

In addition to knowing more about optimistic rollups, we bring you updates on governance activity at major L2s and ecosystem updates to keep you informed about the latest releases and events.

Enjoy and stay tuned for more!

Contributors: Lucent1, Warrior, jengajojo, Tonytad, anointingthompson1.eth, Kornekt, WinVerse,

This is an official newsletter of BanklessDAO. Please subscribe and share to help us grow our audience as we fulfill our mission to build user-friendly crypto onramps.

Subscribe now

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🗞️ Ecosystem Updates

⛓️ Blast-based GambleFi Platform 'RiskOnBlast' Allegedly Rugpulled Presale Participants

🆕 Arbitrum Launches Onchain Gameathon, ‘Arbitrum Arcade’, in Conjunction With Clique

🔀 Arbitrum Foundation Funds Crypto-related Film From Oscar-winning Producer

➿ Former Terra, Cosmos Developers Raise $7.5 Million for Rollup-focused Blockchain Initia

⚡ Mantle v2 Sepolia Testnet Public Contest Powered by Secure3

⭕ Mantle Token Hits All-time High Amid Increased Interest in Layer 2s

🔒 Blast Crosses $2 Billion in TVL Ahead of Feb. 29 Mainnet launch

📈 SettleMint has Integrated Polygon zkEVM Into its Blockchain Transformation Platform

🔮 New Layer 2 Ethereum Network, Zircuit, Soars Past $200m in Deposits in First 72 Hours

🏛 Governance

💬 Proposals in Discussion

Arbitrum

• https://forum.arbitrum.foundation/t/non-constitutional-proposal-to-fund-plurality-labs-milestone-1b-ridge/21332

• https://forum.arbitrum.foundation/t/constitutional-aip-security-council-improvement-proposal/20541

• https://forum.arbitrum.foundation/t/questbook-dda-program-phase-2-request-for-continuation/21326

Optimism

• https://gov.optimism.io/t/upgrade-proposal-6-multi-chain-prep-mcp-l1/7677

Polygon

• https://forum.mantle.xyz/t/voting-mip-29-ec-proposal-second-capital-call-and-updates/8653

Starknet

• https://community.starknet.io/t/starknet-v0-13-1-eip4844-support-more-fee-reductions-stability-quality-of-life/112951

• https://community.starknet.io/t/starknet-2024-roadmap-plan-of-intent/113006

Scaling Ethereum With Optimistic Rollups

Author: Kornekt

Optimistic rollups have emerged as a promising approach to scaling Ethereum's transaction throughput without sacrificing its core principles. Unlike its counterparts, such as Plasma or zk-rollups, an optimistic rollup operates on the principle of optimism, assuming the validity of transactions by default and leveraging off-chain processing to achieve significant scalability gains.

This optimistic approach allows for faster and cheaper transactions, making it an attractive option for dApp developers and users alike.

Core Components of an Optimistic Rollup

At its core, an optimistic rollup comprises several key components, each playing a crucial role in its operation and functionality. Let's get into the intricate details of these core components.

Rollup Contract

The rollup contract serves as the backbone of optimistic rollups, residing on the Ethereum mainnet. It includes a set of contracts that manages the rollup status, stores rollup blocks, and handles user deposits, withdrawals, and dispute resolution.

Sequencers/Operators

Sequencers or operators are responsible for creating rollup blocks and facilitating the transfer of transaction information between Layer 2 and Layer 1. They collect and aggregate transactions off-chain, grouping them into a single rollup block before sending them to the Ethereum mainnet.

Data Availability Layer

Ensuring data availability is crucial for the integrity and security of optimistic rollups. This layer ensures that transaction data is accessible and verifiable by all participants, mitigating the risk of data manipulation or censorship.

Fraud Proofs

Fraud proofs are essential for maintaining the security of optimistic rollups. They provide a mechanism for disputing invalid state transitions and challenging fraudulent transactions. If a validator detects a discrepancy, they can submit fraud proof to initiate the dispute resolution process. While this is an essential component of optimistic rollups, not all active optimistic rollups have a functioning fraud proof system. The presence of an active fraud proof system is one important factor used to gauge rollup maturity.

Security Guarantees of Optimistic Rollups

Central to the success of optimistic rollup is its robust security model, which relies on a combination of economic incentives, cryptographic techniques, and decentralized mechanisms.

Economic Incentives

At the heart of optimistic rollup's security model are economic incentives designed to discourage malicious behavior and incentivize honest participation. Validators, sequencers, and users are economically incentivized to adhere to the protocol rules and refrain from engaging in fraudulent activities. Validators receive rewards for processing transactions accurately and honestly, while challengers are rewarded for detecting and proving fraudulent transactions.

Fraud Proof and Dispute Resolution

Optimistic rollups employ fraud proofs as a mechanism for challenging invalid state transitions and disputing fraudulent transactions. Validators or users can submit fraud proofs to the rollup contract, providing evidence of fraudulent activity. The dispute resolution process involves on-chain verification of the contested transactions, with penalties imposed on the guilty party. By allowing participants to challenge and verify the validity of transactions, optimistic rollups ensure the integrity and security of the system.

Cryptographic Techniques

Cryptographic primitives such as Merkle trees and cryptographic commitments play a vital role in securing optimistic rollups. Merkle trees are used to efficiently represent and verify the validity of transaction data, enabling participants to verify the inclusion of transactions in a block without requiring access to the entire transaction history. Cryptographic commitments ensure the integrity and immutability of transaction data, making it tamper-resistant.

Transparent and Auditable

Transparency and auditability are fundamental principles of optimistic rollups, allowing participants to verify the correctness and fairness of the protocol operation. All transactions and state transitions are recorded on-chain, enabling anyone to audit the system's integrity and detect any discrepancies or anomalies.

Challenges Facing Optimistic Rollups

While optimistic rollups offer promising scalability solutions for Ethereum, its design and implementation are not without challenges and trade-offs. Addressing these complexities is crucial for optimizing the performance, security, and usability of optimistic rollups. Here are some key challenges and trade-offs associated with optimistic rollups:

Scalability vs. Decentralization

One of the fundamental trade-offs in optimistic rollup design is balancing scalability with decentralization. Optimistic rollups aim to improve transaction throughput and reduce fees by offloading transactions to Layer 2. However, the quest for scalability has increased centralization operations in the form of sequencers and validator sets.

Transaction Finality

Optimistic rollups introduce a delay in transaction finality due to the dispute resolution process. During this period, transactions may be contested, leading to delays in confirming the validity of transactions. Users have to wait for the specified challenge period to be able to withdraw funds back to the Layer 1 chain.

Interoperability With Other Layer 2 Scaling Solutions

Interoperability between rollups and other scaling solutions remains a challenge. Developments in this regard focus on interoperability protocols, cross-chain communication standards, and composability frameworks to facilitate seamless interaction between optimistic rollups and other scaling solutions. In a move to enhance interoperability, Optimism, a leading optimistic rollup, is working towards incorporating zero-knowledge proofs in its OP stack.

Continued collaboration, research, and development efforts will further strengthen optimistic rollups as a leading Layer 2 scaling solution and drive widespread adoption across the blockchain ecosystem.

📈 Data

Total Value Locked on L2s Moves Past $29 Billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

🔥 L2 Fees and Costs Update

Transaction Fees as of February 28, 2024:

In the ongoing quest for blockchain scalability and efficiency, Layer 2 solutions continue to demonstrate their potential, with notable developments such as Polygon Nightfall, zkSync, Optimistic Rollups, and sidechains like Polygon PoS and XDai/Gnosis. However, these solutions have also introduced new security challenges, which are being addressed through rigorous audits, testnets, adoption of best practices, and transparent governance.

In this week's editorial, we continue from where we left off in the previous issue, shedding more light on Vitalik Buterin's proposed milestones for rollup maturity, which he categorized into three stages: full training wheels, limited training wheels, and no training wheels. This framework serves as a valuable tool for evaluating the decentralization progress of rollups.

As the Layer 2 ecosystem continues to evolve, it's essential to stay informed on the latest developments, proposals, and projects to better understand the future of Ethereum's scalability and efficiency. So read on as we bring to you the latest stats, proposals, project watch, ecosystem updates, and more from around the world of Ethereum’s Layer 2.

Contributors: Lucent1, anointingthompson1.eth, Warrior, jengajojo, Tonytad, Boluwatife, Kornekt, WinVerse

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🗞️ Ecosystem Updates

⛓️ Frax Launches Layer 2 Network Fraxtal With Partner Apps

🆕 Sushi Plans to Launch Decentralized Derivatives Exchange Susa on Layer N

🔀 Layer 2 Startup LightLink Secures 4.5 Million USD in Seed Round

➿ Herodotus, StarkWare Unveil 'Cairo verifier' to Scale Layer 3s on Starknet

⚡ Starknet Foundation Unveils STRK Token Distribution Plan to Nearly 1.3 Million Eligible Wallets

⭕ zkSync Eyes Lower Fees, 'bigger batches’ After Ethereum's Dencun Upgrade

🔒 Polygon Labs Wants to Help Convert EVM Blockchains Into Validiums via 'type 1 prover'

🔥 Hot News

Redbelly Network Forges Strategic Partnership with TProtocol

The acclaimed World’s ONLY Public Purpose-Built Real-World Asset Tokenization Platform — Redbrlly Network — has announced a groundbreaking partnership with TProtocol, a decentralized Real World Asset (RWA) lending protocol.

This strategic collaboration promises to unleash a tsunami of innovation, propelling both platforms to new heights of success and solidifying their positions as trailblazers in the dynamic world of RWA tokenization.

TProtocol's cutting-edge V2 introduces a game-changing TLending mechanism that focuses on permissioned RWA tokens. This revolutionary approach empowers RWA institutions to borrow USDC against their tokens in separate pools, complete with tailored risk parameters, interest rate models, and liquidation methods. Simultaneously, users can lend their USDC in an over-collateralized manner to gain access to safe real yields backed by RWA tokens.

This partnership represents a bold step toward unlocking the full potential of blockchain technology and ushering in a new era of financial innovation. To get more information on this electrifying partnership, check out the thread below👇

🏛 Governance

⭐ Featured Proposals

Arbitrum Foundation Transparency Report 2023

From the proposal: “The Arbitrum Foundation and the ArbitrumDAO are 10 months old and it has been an amazing year for the community. As part of the Arbitrum Foundation’s commitment to transparency and giving the community insight into the Foundation’s operations, today the Foundation is sharing the first annual transparency report.”

The report is structured based on their technical advancement, grants, strategic partnerships, and educational and community initiatives, you might want to check it out.

💬 Proposals in Discussion

Arbitrum

• https://forum.arbitrum.foundation/t/rfc-daos-committees-balancing-decentralization-with-efficiency/21194

• https://forum.arbitrum.foundation/t/aip-arbos-version-20-atlas/20957

• https://forum.arbitrum.foundation/t/aip-batch-poster-manager-and-sequencer-inbox-finality-fix/20995

• https://forum.arbitrum.foundation/t/rfc-create-a-standardized-guideline-for-non-security-council-elections/20915

Optimism

• https://gov.optimism.io/t/operating-manual-v0-3-8-the-token-house-and-citizens-house/7668

Polygon

• https://forum.polygon.technology/t/an-update-on-polygon-labs-polygon-ventures-and-polygon-id/13507

• https://forum.polygon.technology/t/exploring-the-future-with-aggregated-blockchains-dive-into-polygons-latest-thesis/13521

• https://forum.polygon.technology/t/polygon-staking-report-january-2024-by-validator-info/13545

Mantle

• https://forum.mantle.xyz/t/discussion-mantle-zkevm-research-industry-collaboration/4699

Celo

• https://forum.celo.org/t/celo-governance-guidelines-and-public-goods-funding-strategy-h1-2024-revised/7200

A Primer on Rollup Stages

Author: Kornekt

Currently, we have a vibrant ecosystem of L2 solutions, each using different approaches to solve the scalability trilemma. But as we’ve highlighted in our previous L2 review releases, a paradox arises: the very quest for enhanced scalability has introduced unintended centralization. One of the ways this centralization manifests is in the use of centralized sequencers. However, the concerns extend beyond sequencers.

In our previous issue, the author introduced the idea of decentralization or maturity stages of rollups based on a framework inspired by Vitalik's proposed milestones for rollups taking off training wheels. These “training wheels” are the initial form of centralized mechanisms that rollup projects employ. In this article, we’ll be digging a little deeper into these maturity stages.

The Stages Framework

The stages framework is a tiered system that defines rollup maturity levels. According to Vitalik’s forum post, the idea is to clarify the extent to which rollups minimize trust in specific humans versus trust in code. There are three stages in this framework: Stage 0, Stage 1, and Stage 2. The ultimate goal remains to achieve "Stage 2" decentralization, characterized by trustless operation, although the stages framework does not necessarily reflect rollup security.

Attaining a stage designation requires meeting specific criteria, but according to a detailed analysis by L2BEAT,

“The framework includes highly opinionated components, such as the minimum exit window, the Security Council thresholds, and fraud-proof allowlist size. We believe it was necessary to select some starting points, but in the future, we may adjust them based on new scenarios and feedback from the community. We hope that this framework will become a basis of in-depth debate in the coming months.”

Stage 0, Stage 1, and Stage 2

Stage 0: Full Training Wheels

In this stage, essential control of the rollup is in the hands of the operators. According to L2BEAT, some rollups in this category include Optimism, zkSync Era, and Polygon zkEVM. Here’s a quick breakdown of key features of rollups in this stage:

• The project identifies as a rollup, distinguishing itself from other scaling solutions that are currently available

• The rollup posts all its transactions onchain. That is, the L2 state roots are posted on the L1 chain. It is a key characteristic that allows for withdrawals

• The project must provide Data Availability on L1 and there should be an availability of the rollup node software needed to reconstruct the rollup state based on the L1 data. This way, the L2 state can be easily reconstructed, for transparency and auditability.

• Stage 0 projects may lack an active fraud proof or validity proof mechanism

Stage 1: Limited Training Wheels

Some rollups that pass as Stage 1 according to L2BEAT include Arbitrum and zkSync Lite. Key features of Stage 1 rollups include:

• A functional proof system to verify the validity of transaction batches.

• The fraud proof system is a little decentralized such that at least 5 external actors can submit fraud proofs to challenge invalid transactions.

• The project allows for independent user exits. That is, users can withdraw their funds without relying on the rollup operator. Also, users have at least a 7-day window to exit the project in case of unwanted upgrades involving significant changes to the system

• A Security Council exists to address and step in during issues like bugs in the proof system. This council functions through a multisig setup of at least 8 participants, half of which are external to the rollup project. A 50% consensus threshold is required including a minimum of two of the external participants.

Stage 2: No Training Wheels

Key features of this stage include:

• The project allows permissionless fraud proofs. That is, anyone can submit fraud proofs, increasing participation and decentralization.

• Timelocked upgrades of at least a 30-day window to allow users to exit before significant changes to the protocol

• Security council exists with only very limited power and may act only in cases of significant flaws in the system. This enhances decentralization as the trust placed on the security council is reduced.

Why Reaching Stage 2 Is So Important

Reaching Stage 2 for L2 solutions brings several critical advantages related to the core blockchain ethos of trustlessness and decentralization. Layer 2 solutions should aim for a Stage 2 designation for several key reasons:

• Increased Decentralization and Trust: Stage 2 emphasizes self-governance through smart contracts, minimizing reliance on human operators and reducing single points of failure. This fosters trust in the system, as no single entity controls the network.

• Community-Driven Governance: On-chain governance mechanisms empower the community to make decisions, promoting transparency and participation, essential for a truly decentralized system. Decentralized governance fosters community engagement and ownership, potentially leading to more robust support and development of the network in the long run.

• Improved Network Sustainability: A Stage 2 designation signals a higher level of decentralization and maturity, potentially attracting more users and developers, and benefiting the ecosystem overall.

In summary, reaching Stage 2 signifies a leap towards a truly decentralized and trustless L2 ecosystem. It fosters transparency, user autonomy, and security, ultimately contributing to the long-term viability and scalability of blockchain technology. While all these are necessary, L2 projects are still to follow a progressive approach to take off the “training wheels”. This ensures long-term sustainability of the projects and the ecosystem as a whole.

📈 Data

Total Value Locked on L2s moves past $25 billion!

Top Ten Projects by Total Value Locked:

🔭 Project Watch

Arbitrum

Top Projects by TVL

Optimism

Top Projects by TVL

zkSync

Top Projects by TVL

zkEVM

Top Projects by TVL

🔥 L2 Fees and Costs Update

Transaction Fees as of February 14, 2024: