This is my personal perspective on the current status of scalability on Ethereum. Today, Ethereum is all-in on Layer 2 solutions. While there are different definitions for Layer 2, for the purpose of this post, I define it as solutions secured by Ethereum mainnet. This eliminates sidechains like xDai or Polygon, and focuses on rollups. (I will note that because Polygon checkpoints back to ethereum mainnet, so it's a grey area and still a better solution than any non-ethereum smart contract chain.) For an in-depth explanation of rollups, Vitalik's post is a must-read: An Incomplete Guide to Rollups (vitalik.ca)

DeverseFi has a great banner listing some of the Layer 2 projects currently building on Ethereum, I'll cover some highlights from this list.

Application-specific rollups

Currently, all rollups on mainnet are application-specific. Some of the exciting application-specific rollups are:

– Loopring: Payments and DEX

– zkSync: Payments

– zk.money: Privacy payments

– ImmutableX: NFT minting and exchange. Interestingly, ImmutableX will have multiple applications built on top of it that need to mint and exchange NFTs, such as Gods Unchained and OpenSea.

All of these already do thousands of TPS, many offer gas-free interactions with the very low gas abstracted away from the user. For example, ImmutableX can do ~9,600 TPS, with each NFT mint costing $0.002 in gas, easily subsidized by the protocol as being effectively gas-free to the end user. Another important UX improvement is that transactions are confirmed effectively instantly. Do try these products (and more listed in the banner above) for a glimpse into the future of blockchain scalability.

Programmable rollups

Not every smart contract has the resources to build their own application-specific rollup. This is where a programmable rollups enters the fray, and where most smart contracts will scale. It's a very interesting paradigm where there's intense competition to build the best execution environment on top of Ethereum. (Which is why I call it "Scalability Race".)

Optimistic Ethereum: Limited mainnet since January 2021 (currently Synthetix only for staking), public testnet is now live though not officially supported till later in April. Public mainnet July 2021, although we expect "whitelisted" projects like Uniswap, Chainlink, MakerDAO to go live before then.

Arbitrum: An optimistic rollup and direct competition to Optimistic Ethereum. They are committed to a fully public release, and are currently on their release candidate public testnet. They have a crucial advantage over Optimistic Ethereum currently, with BLS signature aggregation.

Fuel: Also an optimistic rollup. Currently offers payments, but plans to expand into smart contracts later in 2021.

zkSync 2.0: Similar to Fuel, currently a payments protocol, expanding into generalized smart contract support. Unlike the above three, zkSync 2.0 is a ZK rollup, which brings the advantage of instant exits to L1. Public testnet: May 2021; public mainnet: July 2021.

StarkNet: Direct competitor to zkSync 2.0: a programmable ZK rollup. Scheduled for release in late 2021, though potentially accelerating thanks to an impressive $75 million Series B raise last month.

Polygon: Acknowledging the centralization flaws of their current sidechain, Polygon are also developing both ZK and optimistic rollups (among other solutions). No concrete dates I could find. My unsolicited recommendation for Polygon would be to abandon their currently announced kitchen-sink model and laser focus on delivering a world class generalized ZK rollup.

We might end up with a situation here where Ethereum L1 will only act as a settlement and security layer, with a majority of activity happening on rollups. Before we move on beyond rollups, I'd point out that there are multiple projects like Celer, Connext, or Hop that are focusing on interoperability between L1 <> L2 and L2 <> L2.

Enhancements to application-layer

The application-layer (previously called eth1) protocol, EVM and clients continue to mature. For example, EIP-2929 mitigates DoS attacks and could lead to a minor bump in gas limit. EIP-1559 has strong UX implications that *might* mitigate users overpaying for gas, and smooth out spikes. There's no one big upgrade here, but a continuous series of enhancements that'll enable higher gas limits over time. As an example, while I was writing this, Vitalik has published an intriguing proposal to further improve EIP-1559. For context, many of these improvements have enabled Ethereum's gas limit to increase from 4M in 2017 to 12.5M today. Eventually, we may even get back to eWASM (?).

Data sharding / data availability sampling (DAS)

DAS is focused on accelerating rollups by offering massive data availability in a granular manner over 64 shards. Where an efficient rollup can do anywhere between 1,000 TPS to 4,500 TPS today, DAS will accelerate this to potentially over 50,000-100,000 TPS. Gas-efficient rollups like ImmutableX will potentially be accelerated past 200,000 TPS. Previously, this was set to ship before The Merge, but is now coming after The Merge, potentially later in 2022 or early 2023. By the way, The Merge itself does not lead to scalability upgrades, but we could see related proposals to increase gas limit after The Merge.

Statlessness / state expiry

Incredibly, we have gotten this far without actually increasing L1 scalability significantly. L1 gas is going to remain high for the near future – get used to it. This may not matter too much if we have massive scalability on L2, though, as that's where most users will be. L1 will act more of a settlement layer for the bigger players – rollups, exchanges, financial institutions, whales etc.

However, with statelessness / state expiry, this is finally being addressed – L1 gas limits will see significant increases without materially sacrificing decentralization & security. It's still early days, but we finally have some concrete options available. We don't have a date here, but personally I wouldn't expect this before 2023.

Executable sharding

What was previously Phase 2 has now been pushed back given the better solutions now available. Pretty crazy to think rollups did not even exist when sharding was first conceived as a scalability solution! This is where the shards no longer just offering data availability for rollups, but are also able to execute transactions themselves. It's hard to imagine how this will turn out – if rollups attain critical mass and statelessness allows for a significant enough gas limit uptick, we may not even require executable shards at all and it would be better to focus on enhancing (or increasing) data shards, for example. Or, it could be that we only require a smaller number of executable shards. Definitely the most nebulous step here, and something that'll only become clear over time.

Hybrid scalability

I definitely believe that we'll see all kinds of hybrid solutions going forward, with various degrees of decentralization over multiple layer. Visa and Crypto.com are effectively acting as scalability sidechains for Ethereum, though with a significant degree of centralization. What we might see in the future is that Visa cuts out Crypto.com and goes directly to a rollup/L2 wallet/service provider. Likewise, I can also see Reddit build their own rollup, which keeps a lot of data on their centralized servers, and only settles the important stuff on mainnet. We already have such solutions today: for example DeverseFi uses Validium where less critical data like order books (?) are maintained on centralized servers, while all transactions and balances are on-chain. It could even apply for a mainstream application like Fortnite.

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Alright, that probably ended up much longer than I expected, but hopefully it will be informational because there's a lot of misinformation flying around in the crypto space. Feel free to add/correct things and I'll update the post accordingly.