By now everyone is aware of the scalability and interoperability limits of the Ethereum blockchain, which at every peak of the bull market end up damaging the user experience.

The development of the L2 chain landscape, built on top of the main L1, is partially solving these problems by offering blockspace at a reduced cost.

However, the increasingly massive presence of these second-level networks creates damage at the level of liquidity fragmentation, making the cryptographic ecosystem increasingly dispersive.

The future of the Ethereum blockchain definitely depends on L2 networks, but these must necessarily focus on increasing mutual interoperability.

Let’s see everything in detail below.

The scalability problems of the Ethereum blockchain: the future depends on L2

The advent of the Ethereum blockchain in July 2015 completely revolutionized the landscape of digital assets by introducing a much more sophisticated layer compared to Bitcoin.

Over the years, Ethereum has powered thousands of cryptographic protocols thanks to the possibility of implementing smart contract, completely innovating the cryptographic industry.

However, 9 years after its debut on the market, this L1 chain continues to deal with its main Achilles’ heel: scalability.

In fact, despite Ethereum being a highly interoperable programmable blockchain thanks to its EVM nature, it does not boast a high throughput for transactions.

This is a very large limit because it prevents the blockchain from supporting a large amount of traffic, and makes its cost of use unsustainable.

Especially in bull market cycles, where the attention to cryptocurrencies is greater, Ethereum often requires enormous fees to execute transactions.

As we can see in the following Etherscan chart, the cost of using the chain, commonly referred to as “gas“, has often reached peaks above 200 gwei.

We remind you that gwei is the unit of measurement for gas cost: 1 gwei corresponds to 0.000000001 Ether.

If we observe this chart closely, we notice how in the last two years the situation regarding gas price on Ethereum has slightly adjusted.

The strong expansion of the L2 chain has indeed helped the main layer to distribute the traffic over more blockspace, limiting queues and high fees.

Especially from 2023 onwards, the growth of new second-layer networks has allowed for an overall increase in the scalability of the cryptographic ecosystem, while simultaneously consuming less gas.

The settlement requests on Ethereum’s L1 grew exponentially in the middle of the second year, when the L2 trend reached incredible levels.

According to the Coingecko ranking, there are currently 46 different L2 solutions, for a TVL of 40 billion dollars.

Vitalik wants to make Ethereum a ZK-EVM chain 

A lot of attention for the Ethereum L2 sector is channeled towards those networks of the Zk-EVM type, which implement the so-called “zero-knowledge proofs”.

Although this is actually a rather dated topic, it has only become popular in the blockchain space in recent years.

Today, most of the L2 developed on Ethereum are rollup (optimistic or zk) that shift the burden of data processing off-chain by sending verification batches to the L1.

Given the success of this cryptographic technology, Vitalik Buterin himself thought a few months ago to make Ethereum a Zk-EVM chain.

In fact, with an update, it could make this “built-in” feature, allowing the integration of ZK-SNARKs computational proofs also at the execution level.

This would make the main network much more scalable than it is at the moment, capable among other things of validating transactions with maximum focus on privacy.

– Enshrined zk-EVMhttps://t.co/jKohatBnq6

— Danny Willems (@dwillems42) January 16, 2024

The idea of Vitalik, as brilliant and ambitious as it is, involves very complex structural changes.

For example, a change to the rule being proposed would require the addition of a pre-state root and a post-state root to each block entering the consensus layer.

This means that each block gets a special type of cryptographic proof that shows that the transactions in the block are valid and therefore correctly updates the state of the blockchain. 

Another solution would require the separation of different parts of the execution blocks, introducing the calculation via GPU to validate the ZK-SNARKS proofs.

This would make Ethereum a “hybrid” chain where the consensus remains on PoS and the execution of cryptographic proofs is powered by PoW.

Overall, all these possible implementations require significant trade-offs to the Ethereum blockchain.

At the moment, no decision has been made yet: the challenge of the coming years will be focused on making the chain more scalable, while keeping the code structure lean.

Fragmentation of liquidity and interoperability of Ethereum blockchain L2

For now, the presence of L2 solves a substantial part of the scalability of the Ethereum blockchain, making a ZK-EVM update on L1 not strictly necessary.

The large quantity of second-layer networks seems to be sufficient at the moment to meet all the blockspace requests made by the community.

That said, in the future it will be necessary to improve the level of throughput, but for now L2 seems like an excellent compromise to avoid complicating Ethereum’s code too much.

The only problem that absolutely needs to be remedied concerns the fragmentation of liquidity on the various L2s, which often act as single agents.

Many rollups operate in fact in isolation without interoperability, making it complex to transfer funds from one chain to another without going through the main layer.

For example, the ZK Stack chains are interoperable only with other ZK Stack chains. Then, even within a single ecosystem, the technological implementations, wallet integrations, and user interfaces are still in a very early stage.

Approximately 40 billion dollars, according to data from L2 Beat, are fragmented across more than 50 different L2 blockchains.

To address the problem of fragmentation, end users and developers must be able to exchange information about crypto-assets between L2 economically and quickly, without having to stop Ethereum L1.

This remains one of the main challenges that Vitalik and his team must face as soon as possible if they want to make Ethereum a highly interoperable environment.

High interoperability would require that all assets on L2 can be freely moved to any network and decentralized application in the ecosystem.

This would lead to an unprecedented liquidity efficiency, capable of supporting the expansion of the blockchain sector as a whole.