Ethereum might have more to offer than just high gas fees
Layer 2 scaling solutions loom large!
Let’s start our discussion with an obvious question: What Is Ethereum?
Answer: Ethereum is a layer-1 blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum, and its own programming language, called Solidity.
As a blockchain network, Ethereum is a decentralized public ledger for verifying and recording transactions. The network’s users can create, publish, monetize, and use applications on the platform, and use its Ether cryptocurrency as payment. Insiders call the decentralized applications on the network “dApps."
I thought I’d start with this introduction because sometimes it is useful to take a step back. I feel like the crypto space is so incredibly dynamic that we tend to miss a lot of basic learning that is fundamental to our understanding of the crypto space as a whole.
Back to basics then — Blockchain 101. A good place to start is Real Vision Crypto, which has a good explainer documentary. Plus loads of Ethereum related interviews to go with that. So what is Ethereum? What problems was Ethereum created to solve? What might Ethereum become in the future? ‘Ethereum an Investigation’ attempts to answer these questions. This 90-minute documentary includes clips from interviews with key figures working on the core Ethereum protocol, as well as projects that utilize Ethereum in their business cases.
Hate it or love it, Ethereum’s success is undeniable. It is the biggest altcoin out there that rivals Bitcoin in terms of popularity and success in the crypto world. According to Raoul Pal it may even hit $20,000 as it is currently imitating the growth of Bitcoin’s rise in 2017.
All Pie in the Sky I’d say— price action aside Ethereum’s fees are too damn high. The most used smart contract blockchain is practically unusable.
A crypto investor named Zhu Su would certainly agree as he sent off a series of tweets about the state of the Ethereum blockchain.*
Indeed, jerking off has become a bit of a theme in the Ethereum Twittersphere.
*Update: It seems Zhu Su didn’t abandon Ethereum completely. Last week’s market dip must have given him a stiffy! There is a valuable lesson to be learned here folks: Never say never and always buy the damn dip — the smart people clearly understand this!
Back to the discussion at hand — Will Gottsegen of CoinDesk is also clearly frustrated with Ethereum’s high gas prices. He rightly notes that if you want to use dApps (decentralized applications), explore DeFi (decentralized finance) protocols, or get in on the NFT (non-fungible token) craze, you are going to need to master the ins and outs of unhosted wallets and token swaps. But even once you know all that, Ethereum still asks for fees, which — at this point in the development of the blockchain — can be shockingly high.
Minting an NFT on Ethereum will generally cost between $60 and $250, depending on the time of day and the stress on the network. The more users are competing to get their transactions in the chain’s next “block,” the worse the fees.
I mean seriously Ethereum is practically unusable for the Average Joe. I have tried to use Metamask today and transferring $20 ended up costing me $40.
My solution thus far is simple. Abandon ship and dip and dabble with anything but Ethereum, Metamask, UniSwap, etc.
Related to this point, I have recently come across an interesting discussion on Crypto Banter that might be worth considering.
In particular, Ellio Trades Crypto has an interesting take on ZK Roll-ups that I found particularly noteworthy. Ellio, in short, contends that ZK Roll-ups are a new category of chains with tremendous opportunities.
You could be a part of this from the very start with almost no risk. Ellio Trades Crypto
So what are ZK Roll-ups?
Put simply, roll-ups are Layer 2 protocols built on top of Ethereum. They’re called roll-ups because they “roll” lots of transfers “up” into one single transaction. Shifting computation off-chain helps reduce congestion on Ethereum and reduce overall gas costs for users. Roll-ups still pay fees to record their transaction bundles on Ethereum, but the cost per transaction is significantly cheaper because it’s shared among many users. (Think — everyone chips in.)
In a ZK Roll-up, a smart contract processes and verifies that all the bundled transactions are valid off-chain. That validity proof is publicly recorded on-chain, immortalizing it forever on an Ethereum block. (The other main roll-up flavour is called Optimistic, because it assumes there is no foul play and relies on challenges known as fraud proofs.)
ZK Roll-ups are essentially an innovative solution to the Ethereum blockchain scaling dilemma. Some even consider them to be the holy grail of scaling —(wow big call!)
So let’s think about this in the context of the blockchain trilemma, which refers to a widely held belief that decentralized networks can only provide two of three benefits at any given time with respect to decentralization, security, and scalability. So in essence, ZK Roll-ups are Layer-2 solutions that are overcoming these obstacles to solve the trilemma once and for all.
The Bankless Podcast has an interesting discussion with the team from StarkWare in this regards. The goal of StarkWare is simple: “Bring massive scalability to Ethereum while preserving Layer-1 security, permissionless interactions, and decentralization.”
I don’t know about you but I am clearly late to the Ethereum party so fetching a ride on one of those ZK Roll-up projects might definitely be a good punt.
Ellio Trades Crypto would certainly agree.
In this video, Ellio Trades Crypto discusses what ZK-Roll-ups are and how we all can get involved and possibly benefit from this upcoming trend, which is in short through the ‘upcoming’ zkSync Airdrop.*
*Please note: There is just an expectation of getting an Airdrop in the future. No Guarantee.
Similar to StarkWare — zkSync is a scaling and privacy engine for Ethereum. Its current functionality scope includes low gas transfers of ETH and ERC20 tokens in the Ethereum network, atomic swaps & limit orders as well as native L2 NFT support.
zkSync has already announced that they will launch their native token in the future. They’ve created a ported version of Uniswap V3 called UniSync. Trying out the testnet and mainnet may make you eligible for an airdrop in the future.
Here a quick summary or Little League Major Explainer: Ethereum good but too expensive— Frei Bier angry! ZK Roll-ups are an innovative solution to the Ethereum scaling problem. Opportunity here. ZK Roll-ups have no tokens yet — use zkSync early and hope for an Airdrop. DYOR and be in it from the beginning!
Here is a good explainer video if you are keen to take a punt on a potential Airdrop. I have followed it successfully and accordingly might be in with a grin. I think I paid about $60(ish) bucks in gas fees so let’s consider it an investment. I also minted my first NFT while I was at it. *The NFT is a lovely wedding photo of my beautiful wife. Not for sale (of course) but serious requests will be considered (cheeky smile emoji).
Overall, zkSync offers a nifty, user-friendly experience. Ethereum (WE) might be onto something big!
Ellio Trades Crypto also mentions Polygon so let’s put on our thinking hats for a moment.
I never really looked into Polygon ($MATIC) but it turns out it is a very nifty project if you are an Ethereum bull. It is an emerging platform meant to develop and connect Ethereum-based blockchain networks. It is steadily becoming the preferred Ethereum Layer 2 solutions provider and is seeing incredible market growth.
According to the Bankless Podcast, Polygon is the Swiss Army Knife of Scaling (I like that). With a suite of scaling products, Polygon is pushing in many directions to scale out the Ethereum ecosystem.
Here is the good news. Polygon is very bullish on the future of ZK’s. In fact, they made it a centrepiece of their strategic vision in the Zero Knowledge Thesis that was published in August. As part of that mission, they have committed $1 billion to their ZK-related efforts.
Put simply, as far as I can understand it — if ZK Roll-ups ‘roll’ then Polygon ‘rolls’ and so would a nifty retailer! So let’s roll!
In summary, Ethereum is outperforming Bitcoin because it’s a technology bet rather than a bet on inflation, says crypto bull Mike Novogratz. Indeed, I am very bullish on Ethereum as far as price action is concerned. However, let’s face it — it is unusable for the Average Joe. For instance, I spent more than $60 in gas fees to activate my zkSync account (like wtf)!
ZK Roll-up solutions have the optimal solution for addressing the increasing load on the Ethereum network. Scalability acts as a promising requirement for the widespread adoption of the Ethereum network. The lower transaction fees will encourage more users to start using Ethereum.
ZK’s such as StarkWare and zkSync have peaked my interest as they appear to have immense potential to change the blockchain landscape beneficially. It might be a good idea to activate a zkSync account just in case they decide to do an Airdrop.
Polygon, Arbitrum , Optimism, Immutable-X, … are all examples of well-known Ethereum scaling solutions that provide improvements to transaction affordability. Polygon in particular looks very sexy. This shall be enough to get the DYOR party started.
Happy ZK roll’ing ya’ll.
Frei Bier / Twitter: @FreiBIER13
DISCLAIMER: My writings are merely a reflection of my learning journey and my attempt to compartmentalize the cryptoverse. I am learning out loud so feel free to correct me or disagree with me. This is not investment advice but my hope is that you find value in some of my links and ideas.