A Comprehensive Interpretation of the Ethereum Rollup Ecosystem

This article was published on Bibi News, authored by Breeze.

This article discusses the various Rollup technologies adopted by different projects, their plans and progress regarding Rollup, experiences in terms of costs, speed, and functionality of each Rollup, as well as incentives such as airdrops and liquidity mining related to Rollup, to illustrate the current state of Rollup in these projects and provide a panoramic view of the Ethereum Rollup ecosystem.

Four Types of Rollup Solutions

Currently, there are mainly four types of Rollup solutions: Optimistic Rollup, ZK Rollup, Arbitrum, and Validium.
All Rollups are doing a few things: first, aggregating multiple transactions off-chain for batch processing (writing transactions); second, verifying whether the transactions are correct to ensure that the data placed on-chain is secure; third, writing the confirmed final state onto the chain.

The differences among the four Rollup solutions mentioned above mainly lie in the "transaction verification" phase. "Transaction verification" is essentially a trade-off between the security and scalability of Rollup.

On one hand, there must be a feasible method to verify transactions, preventing problematic transactions and data from being brought onto the chain, which would compromise the security of Layer 1. On the other hand, excessive verification data and processes cannot be placed on-chain for the sake of security, as this would significantly undermine the scalability effect of Rollup.

• ZK Rollup verifies transactions using zero-knowledge proof technology zk-SNARK. The full English name of zero-knowledge proof zk-SNARK is zero knowledge-sufficient non-interactive argument of knowledge.

From the name, it is evident that zero-knowledge proof zk-SNARK is a "sufficient" verification method, akin to solving a mathematical problem with strict proof logic, where there are no loopholes in the logical deduction process. Therefore, ZK Rollup is the most general and secure solution among the four options.

However, the entire verification logic of ZK Rollup is very difficult to produce. This is also why ZK Rollup is suitable for some simple transactions, and it is currently challenging to support virtual machines (VMs) because verifying these complex smart contracts is extremely difficult and requires extensive research by various teams.

• Validium also uses zero-knowledge proof zk-SNARK, but its biggest difference from ZK Rollup is that data is only available off-chain, and on-chain account transfers require authorization from off-chain users. This introduces a certain degree of off-chain centralization risk. Some viewpoints classify Validium under the ZK Rollup solution.

• Optimistic Rollup primarily conducts transaction verification through "economic challenges," similar to solving a problem by eliminating incorrect answers to bring the final state closer to the correct one.

Thus, this verification process is not sufficient, but it is simpler. Therefore, Optimistic can support smart contracts. Optimistic Rollup has its own built-in virtual machine (VM), and projects on Ethereum that want to migrate to Optimistic need to modify and transform their code. Compared to ZK Rollup, Optimistic is more convenient for developers, but it has lower security.

• Similar to Optimistic Rollup, Arbitrum also employs "economic challenges" and directly supports the Ethereum Virtual Machine (EVM), meaning that applications on Ethereum can run directly on Arbitrum, making it even more convenient than Optimistic. Additionally, Arbitrum can support more virtual machines (VMs), but due to its broader applicability and more complex mechanisms, there is a greater possibility of vulnerabilities or risks being introduced.

Current State of Rollup Applications

Rollup is a direction publicly recognized by the Ethereum team. During the third anniversary AMA of CoinHu, Vitalik stated, "Rollup is more suitable than ETH2.0 to solve the current scalability problem."

In February, Vitalik mentioned in the community that "the first batch of Rollups supporting the Ethereum Virtual Machine (EVM) may go live in March, with Optimism and Arbitrum leading the way." The adoption of Rollup by project teams may indeed be just around the corner.

Projects adopting Rollup or having related plans

Project teams are planning, preparing, and testing for Rollup, and some have already supported Rollup. Below, Bibi News will list the progress of various project teams regarding Rollup, hoping to provide a comprehensive picture of Rollup.

Optimism
Developing Optimistic Rollup in collaboration with Offchain Labs
Progress: Mainnet will go live in March. Notably, Optimism recently completed a $25 million Series A funding round led by a16z. In the announcement, Optimism stated that with the funding, the team can recruit talent, and the originally planned public test version in March has been expedited, with Optimism set to launch the mainnet for arbitrary contract deployment in March.

Uniswap V3
May adopt Optimistic Rollup
Progress: Regarding when Uniswap's V3 version will go live, yesterday yearn.finance founder Andre Cronje speculated that there might be significant progress soon.

One exciting aspect of V3 is the possibility of Layer 2 implementation. Uniswap founder Hayden Adams previously stated on Twitter, "When the production side is ready, V3 may be deployed to Rollup that supports the Solidity language."
As for which Rollup technology will be specifically adopted, the official information has not been clearly released, but Hayden has expressed excitement about Optimistic Rollup solutions like Optimism. Optimistic Rollup allows the migration of Solidity smart contracts to Layer 2 without the need to build complex infrastructure based on DApps.

It can be seen that the Uniswap project team may choose the Rollup solution from the perspective of developer friendliness, and Optimistic Rollup is generally considered the solution that Uniswap will choose.

Uniswap has previously co-developed a demo called Unipig with Optimism, showcasing Uniswap's Layer 2 implementation. The website information indicates that this platform has no gas fees and can achieve a 10x scaling for Uniswap, with a TPS of about 200 transactions per second. However, Unipig is no longer operational.

Synthetix
Adopts Optimistic Rollup
Progress: Rollup has already gone live. Synthetix can be said to be one of the first projects to try Rollup and make the fastest progress.

According to official statements, due to the incompatibility of Layer 1 and Layer 2 code, the smart contracts of Synthetix on Layer 1 need to be processed to run on Optimistic. To minimize risks, Synthetix has adopted a gradual migration strategy, incrementally adding features on Layer 2. Synthetix has now implemented staking functionality on the Optimistic network.

The Synthetix project team stated that the migration to Layer 2 will mainly focus on two aspects—"staking" and "trading," with Synthetix aiming to support trading functionality on both Layer 1 and Layer 2 while fully transferring the staking functionality to Layer 2. Based on this, Synthetix's deployment on Optimistic will be divided into multiple phases, with the initial phases mainly being:

Phase 0: One-way bridge from SNX on Layer 1 to Layer 2, minting of sUSD, claiming of SNX tokens (Note: sUSD is the intermediate asset used by Synthetix to mint synthetic assets; during this phase, SNX and sUSD on Layer 2 are not tradable)

Phase 1: Achieving trading of sUSD and other synthetic assets, transferring SNX and synthetic assets

Phase 2: Bidirectional SNX bridge between Layer 1 and Layer 2
……

Synthetix has a comprehensive range of functionalities on Layer 1, including trading, derivatives, asset management, etc., so as this project progresses on Optimistic, its Layer 2 state is quite promising.
Additionally, it is worth mentioning that Synthetix encourages users to participate in Layer 2. During the testnet phase, SynthetixDAO distributed a total of 200,000 SNX tokens to users participating in the Layer 2 testnet. After the staking functionality officially goes live on Optimistic, users participating in Layer 2 staking can also receive staking rewards (Note: In the early stages, the process from Layer 1 to Layer 2 is one-way; users should participate cautiously). According to the Blockchain Study Society's experience, all transaction fees on Layer 2 are borne by Synthetix.

Volmex
Adopts Optimistic Rollup
Progress: Currently in the testnet phase. The Volmex platform will provide financial tools such as Ethereum volatility indices. To achieve cheaper and faster index queries and futures trading, Volmex has been experimenting with Rollup.

Currently, the Volmex team has begun development on the Optimism testnet and will implement the public test network and mainnet with the help of the Optimism team, while also deploying the corresponding Optimistic Virtual Machine (OVM). As Optimism advances its mainnet in March, Volmex is also expected to make progress on Rollup.

Saddle
Adopts Optimistic Rollup
Progress: Currently migrating smart contracts to Optimistic. Saddle is an automated market-making tool specifically designed for price-anchored crypto assets. The project team stated on Twitter that they are currently migrating smart contracts to the Optimistic network to achieve instant trading and low fees.

Saddle and Synthetix are partners. As both Optimistic and Synthetix make progress on Rollup, Saddle's advancement on Rollup can also maintain synchronization with Synthetix in terms of functionality and collaboration, which can be understood as composability migrating to Layer 2.

Celer
Adopts Optimistic Rollup
Progress: Launched Layer2.finance, a DeFi scaling solution based on Optimistic Rollup. Celer Network is a Layer 2 scaling project for Ethereum. Like other Rollups, users can deposit funds into the Layer2.finance Rollup chain by transacting with Rollup contracts on Layer 1, but Layer2.finance will not migrate the DeFi protocol itself to Layer 2.

Layer2.finance plans to launch version 1.0 in Q1 2021, and after the initial iteration phase, it will upgrade to ZK Rollup, supporting protocols such as Curve, yearn, Compound, and Aave in version 1.0. Layer2.finance will not issue new tokens, and to enhance liquidity on the platform, liquidity mining may be conducted.

zkSync
A ZK Rollup solution created by Matter Labs
Progress: The mainnet has gone live, but as mentioned earlier, ZK Rollup is quite challenging, and zkSync has not yet provided a universal Rollup solution.

The zkSync browser information shows that the mainnet currently supports over 40 tokens, including ETH, LRC, UNI, SNX, USDT, and DAI. As of the time of writing, over 1.11 million transactions have occurred on this network. Projects such as Curve, Balancer, and Sushiswap have expressed intentions to choose zkSync as their Rollup solution.

Loopring
A Layer 2 protocol based on ZK Rollup
Progress: The mainnet has gone live. Although there is no clear information indicating whether Loopring has universal applicability, considering the complexity of ZK Rollup, Loopring likely does not yet have a universal solution, similar to zkSync.

The Loopring team has always been very optimistic about Layer 2 networks, estimating that by June of this year, over 10% of Ethereum Layer 1 transactions will be carried by Layer 2. As a common feature of ZK Rollup solutions, Loopring also emphasizes its advantages on its official website: security on par with Layer 1; high performance, with TPS reaching 2000+/s; low fees, less than 0.001 RMB per transaction.

In addition to being a ZK Rollup scaling protocol, Loopring is particularly dedicated to building DEXs. Recently, in zkSync's Series A funding round, Loopring also acted as an investor.

Curve
Adopts zkSync (ZK Rollup)
Progress: A significant advancement for Curve on Rollup occurred in October 2020, when it jointly launched a Layer 2 smart contract testnet with zkSync, making Curve the first DApp to settle on it.

As is well known, ZK Rollup is challenging to support smart contracts due to its technical difficulty. However, the testnet launched by zkSync and Curve introduced a virtual machine (VM) friendly to zero-knowledge proof zk-SNARK, as well as a programming language called Zinc. This means that ZK Rollup (or at least zkSync) can support smart contracts to a certain extent. Although it is more challenging, DApps on Ethereum can potentially migrate to zkSync by compiling code without needing to rebuild the entire codebase.

Sushiswap
Adopts zkSync (ZK Rollup)
Progress: Sushiswap stated in its roadmap at the beginning of this year that it would adopt zkSync's Rollup solution together with the Yearn ecosystem. Notably, Uniswap may adopt Optimistic Rollup. This is another distinction from Uniswap since Sushiswap cloned it, indicating that Sushiswap has indeed gained independence and vitality.

Sushiswap's official roadmap mentions that its choice of Rollup solution is also based on the compatibility of the code. Sushiswap stated that it will pay attention to the progress of the programming language Zinc, which supports smart contracts mentioned earlier (as noted in the previous entry, zkSync launched a virtual machine (VM) and the Zinc programming language, which is both secure and has a certain degree of compatibility).

Balancer
Adopts ZK Rollup
Progress: Balancer's CTO Mike McDonald shared his views on Layer 2 on Twitter. He believes that projects aggregating asset liquidity may fall into two pitfalls when scaling Layer 2: one is launching two separate applications on Layer 1 and Layer 2, severing liquidity on both sides; the other is completely detaching from Layer 1's composability and liquidity. Mike stated that ZK Rollup is the most promising scaling solution and is the only scaling path Balancer is exploring internally.

ZKSwap
Adopts ZK Rollup
Progress: The mainnet has gone live. ZKSwap is a Layer 2 DEX based on ZK Rollup. Recently, ZKSwap has been quite aggressive in incentivizing Layer 2 users. On one hand, it will provide long-term token incentives to users providing liquidity. On the other hand, it has conducted token airdrops for token holders.

ZKSwap's roadmap indicates that this project will have significant actions this year. It mentions plans to shorten the withdrawal time from Layer 2 to Layer 1, support the ERC721 token standard, launch lending services and stablecoin exchange services, and develop a universal Ethereum Virtual Machine (EVM) model based on ZK Rollup, indicating a considerable amount of work to be done with high implementation difficulty.

Storji
Adopts zkSync (ZK Rollup)
Progress: The decentralized storage application Storji has integrated zkSync. Operators of storage nodes on Storji can choose zkSync when receiving fees. It is reported that Storji's current TPS can reach 2000 transactions per second.

StablePay
Adopts zkSync (ZK Rollup)
Progress: Currently integrating zkSync. StablePay is a cryptocurrency payment and donation platform, and the project team recently stated that they are integrating zkSync. According to the statement, StablePay is currently migrating smart contract code and test code to zkSync. The project team also expressed a desire to build more cool things on Layer 2 with the support of zkSync.

Golem
Adopts zkSync (ZK Rollup)
Progress: No recent updates. Golem is a decentralized computing power rental platform on Ethereum. The Golem project team mentioned zkSync in a tweet at the end of 2020, stating that they were using zkSync in the new Golem payment network at that time.

Numio
Adopts zkSync (ZK Rollup)
Progress: Numio is a blockchain-based payment and storage application. Numio has already launched a wallet application that supports Layer 2. The Numio team stated that they are using the zkSync solution on Layer 2.

Regarding future progress, Numio stated, "More assets will be directly added to the wallet, and the team can’t wait to see users purchase crypto assets on Layer 2 and send the assets to their accounts. 2021 will be an exciting year." This may hint that Numio will have significant progress on Layer 2 this year.

Rails
Adopts ZK Rollup
Progress: Rails is an Ethereum ZK Rollup payment application managed by DXdao and supported by Loopring's technology. Users can transfer cryptocurrency from their wallets to Layer 2, allowing them to send ETH and ERC20 tokens to any user on Layer 2 without paying gas fees, enabling instant payments. The project has not recently announced any Rollup-related progress.

Aztec
Adopts ZK Rollup
Progress: The mainnet is about to go live. Aztec focuses on privacy in blockchain. In January of this year, Aztec collaborated with StarkWare, which focuses on Rollup, to launch a software protocol for zero-knowledge proof zk-SNARK applications, specifically applied in Rollup-related scenarios.

In October 2020, Aztec launched the ZK Rollup network Aztec 2.0, hoping this network can become the infrastructure for scalability and programmable privacy payments on Ethereum. The Aztec project team recently stated in a tweet that they will soon launch the Aztec 2.0 privacy Rollup mainnet and initiated a bug bounty program before the launch.

Hermez
Adopts ZK Rollup
Progress: The mainnet is about to go live. Hermez is a ZK Rollup scaling network on Ethereum, with the team estimating TPS can reach 2000 transactions per second. Hermez's public testnet went live a few days ago, and the mainnet will be launched in the coming days.

Arbitrum
An Ethereum Rollup solution created by Offchain Labs
Progress: The mainnet is about to go live. As mentioned earlier, Arbitrum is similar to the Optimistic Rollup solution, but Arbitrum directly supports the Ethereum Virtual Machine (EVM) and other virtual machines (VMs), corresponding to greater risks than Optimistic Rollup.

The Arbitrum project team has provided some demos demonstrating how DeFi operates on Arbitrum. In terms of progress, Arbitrum is abandoning patents for the upcoming mainnet launch, attempting to achieve open-source status.

MCDEX
Adopts Arbitrum
Progress: The MCDEX V3 public test version has gone live. MCDEX is a decentralized cryptocurrency derivatives DEX on Ethereum and is likely the first application to adopt the Arbitrum solution. This project launched the Layer 2 version testnet at the end of last year. In February of this year, MCDEX officially launched the V3 version of the public test network, allowing users to create efficient perpetual contract markets and enjoy the benefits of low fees and high transaction confirmation speeds on Layer 2.

Bancor
Adopts Arbitrum
Progress: Has been deployed to the Arbitrum testnet. As the pioneer of the AMM concept, Bancor has been iterating and innovating since the end of last year, including on Layer 2.

In January of this year, Bancor officially stated that its smart contracts have been deployed to the Arbitrum testnet. Like many Rollup solutions, Bancor will enjoy faster transaction speeds, less latency, and lower fees on Layer 2. The Arbitrum mainnet is about to go live, which should also drive Rollup progress for Ethereum applications adopting the Arbitrum solution, including Bancor.

Bounce
Adopts Arbitrum
Progress: Unknown. Bounce is a decentralized token auction platform built on Ethereum and BSC. According to Chain News, Bounce is currently participating in Rollup development on Arbitrum.

Hop
Adopts Arbitrum
Progress: Unknown. Hop is a protocol that allows tokens to transfer across Rollups or between Rollup and Layer 1 networks. According to Chain News, Hop is one of the first applications on Arbitrum. The Hop team has not yet released any progress information regarding Rollup. However, at the end of January this year, Ethereum Solidity developers released a demo for Hop.

Swapr
Adopts Arbitrum
Progress: Has been deployed to the Arbitrum testnet. Swapr is a fork of Uniswap and is a governable AMM. Swapr and the previously mentioned Rails are both projects within the DXdao ecosystem, part of DXdao's scaling strategy, with Rails adopting the ZK Rollup solution and Swapr adopting the Arbitrum solution.
DXdao has stated that it has deployed Swapr to the Arbitrum testnet and plans to deploy Omen and a DXdao base for governing Rollup.

Augur
Adopts Arbitrum
Progress: Unknown. According to Chain News, the decentralized prediction market Augur will choose Arbitrum as its Rollup solution. The official Rollup information released by Augur is limited. In an announcement at the beginning of this year, Augur also mentioned sidechains as a scaling solution.

Cometh
Adopts Arbitrum
Progress: The mainnet has gone live. Cometh integrates elements of gaming, yield farming, and NFTs. According to Chain News, Cometh adopts the Arbitrum Rollup solution and has already launched its mainnet. Recently, Cometh collaborated with AaveGotchi in the sidechain Polygon, so Cometh also supports the Polygon network.

DAOstack
Adopts Arbitrum
Progress: Plans to support the deployment and maintenance of all Layer 2 DAOs. DAOstack is a system dedicated to decentralized coordination on Ethereum, providing support for decentralized organizations, funds, and markets.

In January of this year, DAOstack collaborated with the Arbitrum development team Offchain Labs to deploy a DApp built on DAOstack to Arbitrum. Recently, DAOstack stated on Twitter that it plans to support the deployment and maintenance of all Layer 2 DAOs, starting with Arbitrum.

StarkWare/StarkNet/StarkEx
Ethereum Rollup Network
Progress: StarkWare is a research institution for zero-knowledge proof zk-SNARK, StarkNet is the Rollup network developed by this institution, and StarkEx is one of the first applications of StarkNet, which has already launched its mainnet.

The Validium technology mentioned earlier is also a Layer 2 solution launched by StarkWare. Many people classify StarkNet as a type of ZK Rollup. The difference between StarkNet and ZK Rollup is that StarkNet uses STARK technology for zero-knowledge proofs, rather than the more common SNARK. In this article, Bibi News categorizes all Rollups related to StarkWare as Validium, which may differ in classification methods, and this is clarified here.

In January of this year, StarkWare officially announced the detailed roadmap for StarkNet, which outlines four phases for StarkNet, aiming to achieve a foundation, single application Rollup, multi-application Rollup, and decentralized Rollup.

dYdX
Adopts StarkWare
Progress: dYdX is a decentralized cryptocurrency derivatives trading platform that has launched a Layer 2 internal testing version, currently providing perpetual contract trading for BTC/USD, ETH/USD, and LINK/USD trading pairs. After fully testing the system's stability, dYdX will conduct a public test in a few weeks.

Paraswap
Adopts StarkWare
Progress: Unknown. Paraswap is a DEX aggregator. According to information from the Blockchain Study Society, Paraswap will also adopt StarkWare's Rollup solution.

DeversiFi
Adopts StarkWare
Progress: Has integrated StarkWare Rollup functionality. DeversiFi is a decentralized trading platform that launched DeversiFi in collaboration with StarkWare in June 2020, achieving a TPS of over 9000, with transactions being private by default, deep trading liquidity, and low transaction fees.

Immutable
Adopts StarkWare
Progress: The NFT trading platform Immutable X based on StarkWare is about to go live. Immutable is the development company behind the famous Ethereum card battle game Gods Unchained, and this company is collaborating with StarkWare to develop Immutable X. Immutable's Twitter information indicates that Immutable X is about to launch, and Gods Unchained users will have the opportunity to be among the first to experience this trading platform.

It is understood that Immutable X will significantly increase throughput, and transaction fees can be reduced to negligible levels. Immutable X may be the most noteworthy attempt in the NFT Layer 2 direction.

BadgerDAO
Adopts StarkWare
Progress: BadgerDAO is dedicated to bringing BTC into DeFi. According to Chain News, BadgerDAO has already launched on StarkNet.