Dialogue with Ethereum researcher Polynya: On Rollups and the Future of Ethereum

Original Title: "Dialogue with Ethereum Researcher Polynya: Why L2 is the Future?"

Original Source: Bankless

Original Compilation: Nanfeng, Unitimes

This article is a transcript of an interview between David Hoffman, co-founder of Bankless, and Ethereum and crypto anonymous researcher Polynya. Polynya shares some of the best thoughts on L2, zk-Rollup, and the Web3 world during the interview. Below are the main points from this interview:

David Hoffman: What is your favorite L1 chain besides Ethereum?

Polynya: L1 chains are quite boring, but there is one obvious exception—L1 chains that adopt validity proofs/ZK (zero-knowledge), like Mina. However, it should be noted that ZK-Rollups are better!

ZK-Rollups gain almost all the long-term benefits of ZK-L1 chains while inheriting the highest security, sustainability, and liquidity attributes, with greater flexibility to focus on building the best execution layer. Fortunately, ZK-L1 chains also have the simplest path to transform into ZK-Rollups if that is a better solution for specific ZK-L1 chain projects!

David Hoffman: What does a decentralized L2 network look like? What specifically makes decentralization achievable?**

Polynya: A decentralized L2 network is a Rollup that has a secure "bridge" to L1 and includes an escape mechanism to withdraw to L1, even if the Rollup completely fails (including funds in smart contracts).

In a decentralized Rollup network, (transaction) ordering and proving are permissionless, which also means a failed Rollup can be seamlessly restored by the community. The upgradability of contracts is also decentralized, at least achievable through governance, but some key modules, like the bridge holding funds, are immutable.

Ideally, we hope to eventually achieve completely immutable "ossified" Rollups. There should be easily accessible tools that allow people to enter or exit the Rollup without any trust assumptions. If all of this is realized, then the Rollup will actually be as secure and decentralized as L1.

David Hoffman: Are all L2s safe to use?**

Polynya: Absolutely not! The website L2Beat.com provides a detailed description of the security risks for each Rollup network. This is an early-stage technology, so caution is advised!

Above: L2Beat.com summarizes the risks of the Arbitrum network.

David Hoffman: What are the biggest risks of using L2 networks?**

Polynya: Currently, many Rollup networks have multi-sig upgradability.

Multi-sigs can conspire to steal funds from Rollups. Of course, there is a spectrum here: how distributed is the multi-sig group? How transparent is it? Are there time locks on upgrades?

Pragmatically, I see two risks:

1) A Dr. Strangelove-type scenario where many people (multi-sig signers) lose their minds and decide to create chaos.

2) More likely, regulators may order enough multi-sig signers to shut down a Rollup. The second scenario can largely be mitigated by a community multi-sig distributed around the world, and zkSync does well in this regard.

Currently, most Rollups have centralized sequencers, so the biggest risk may be the sequencer going down, making transactions during its downtime very difficult, expensive, or even impossible (depending on the specific Rollup). But note that your funds are never at risk.

The good news is that most Rollup teams are committed to a gradual path to decentralization. I am optimistic that by this time next year, many major Rollup networks' risks can be negligible.

David Hoffman: Do you think it is essential for L2 networks without a token to issue a native token to compete with other L1 chains?**

Polynya: Yes, I think it is quite necessary. Of course, some Rollups can do well without issuing a native token, but if a Rollup wants to become a large-scale network, then community ownership (achieved through issuing a native token) seems to be a prerequisite.

David Hoffman: What does "Ethereum alignment" mean to you? Why is this important? How do you assess different L2 networks in terms of their "Ethereum alignment"?**

Polynya: To me, it means pragmatism. Ethereum has the highest security, liquidity, and network effects, and it also has the most ambitious technical roadmap for scaling Rollups. Therefore, it makes a lot of sense for Rollups to focus on the Ethereum network. Many L2 teams ideologically align with Ethereum's values, which are not available elsewhere. Other teams may focus on Ethereum because it is the place with the most liquidity and opportunities. Of course, we will certainly see some L2 networks forked on other L1 networks outside of Ethereum.

David Hoffman: How do you think the composability issue of L2 will be resolved?**

Polynya: All Rollups are fully composable. We may have an amazing Rollup network in the future that can handle millions of TPS (if achievable), and this Rollup is fully composable. Moreover, the scalability potential of Rollups is bound to be higher than that of L1, so the fragmentation of Rollups will be smaller.

Of course, just as there are composability breaks between different L1 networks, there will also be composability issues between different Rollups. However, Rollups offer better interoperability possibilities because they share the same L1 settlement layer. Therefore, we can have solutions like dAMM that allow multiple Rollup networks to share liquidity; there are also solutions like DeFi Pooling that enable multiple Rollups to access dApps on L1.

Unlike bridges between L1 networks, bridges between Rollups are very secure. With the new sharding design of Danksharding, ZK-Rollups will be able to operate in sync with L1. Additionally, we may eventually have multiple ZK-Rollups internally combined, making it appear to L1 that these ZK-Rollups use a single proof, achieving a single composable state.

Of course, this is speculative, but the point is that the design space of Rollups is much broader, making the composability and fragmentation issues between Rollups much smaller than those between L1s.

David Hoffman: How will the Ethereum L2 ecosystem begin to become more interconnected?**

Polynya: By abstracting all this (L2 complexity) away from the user side. Users just use smart wallets like Argent, and they don’t need to know which Rollup network they are using. They simply use applications and use cases based on their choices, with all blockchain-related aspects seamlessly abstracted in the background. Of course, this is a long-term vision that will take years to realize. At this moment, we already have quite seamless "bridges" and DeFi Pooling solutions. For example, the social recovery wallet Argent integrates with the Ethereum L2 payment solution zkSync.

David Hoffman: How will Ethereum L2 networks attract users who are already using other L1 networks?**

Polynya: It’s simple—long-term, Rollups have higher scalability potential, functionality, programmability, and user experience than any L1 network.

The real game-changer will be those unique and innovative applications within L2 networks that are even impossible to deploy on L1 networks. For instance, we have already seen on Twitter that @guiltygyoza has built a physics engine and 3D models on the Ethereum L2 network StarkNet (see below). In the long run, users will use Rollups because they far outperform L1 networks in every aspect. In the short term, developer adoption and token incentives may be effective for L2 to attract new users.

David Hoffman: What do you think is the easiest goal for developers to achieve that could greatly improve the Ethereum ecosystem?**

Polynya: I’m not sure; I’m not a developer. I don’t know what the easiest achievable goal is. Although it’s not an easy goal, I would say that the current user experience is very poor and fragmented. I think we need some standardization—more initiatives like "Sign in with Ethereum" to create a coherent user experience.

David Hoffman: Are you worried that the increase in block space capacity brought by L2 will exceed the growth in transaction demand?**

Polynya: Yes! Of course, the current applications do not require the kind of capacity that Rollups & data sharding can provide. I hope that with higher capacity and better functionality, we will see new types of applications with a broader user base. But that’s just hope. We’ll see!

David Hoffman: Is this a race to the bottom, or will transaction demand grow exponentially as gas prices decline?**

Polynya: Meaningful transaction demand definitely has an upper limit. Of course, if you make things cheap enough or free, it will be flooded with junk transactions. But I think these are parasitic and should be avoided.

David Hoffman: What is something about the future of the crypto industry that only a few people understand but is crucial for the industry’s success?**

Polynya: Trust is a fundamental principle of humanity—most people place a high value on trust. The goal of the crypto industry should not be absolute trustlessness but rather to improve our trust system through fair competition.

David Hoffman: In your view, under what circumstances could Ethereum fail?**

Polynya: Because it is not decentralized enough and does not ossify quickly enough. Some completely revolutionary things emerge that cause Ethereum to be eliminated because by then Ethereum has already ossified & become very decentralized, making it unable to respond quickly. Additionally, it is worth noting that I believe the fate of ETH as an asset and Ethereum as a network may differ. (It is almost certain that BTC and the Bitcoin network will experience this as well.)

David Hoffman: Can new general data availability (DA) projects gain attention? If so, can these projects leverage network effects and launch a settlement layer to steal market share from Ethereum?**

Polynya: These are two different things. General DA projects can certainly gain attention. However, this network effect is largely unrelated to what is needed to become a settlement layer (including quality money, high economic security, broad token distribution, liquidity breadth and depth, the Lindy effect, etc.). Moreover, Ethereum is building its own highly scalable DA layer to complement its established settlement layer. Now, there may be some applications that do not care about this, in which case I would say that the target market of these applications is different from Ethereum.

David Hoffman: Can ZK-Rollups achieve EVM equivalence?**

Polynya: Yes! The application development team at ConsenSys has created a detailed specification: A zk-evm specification - General Layer 2 - Ethereum Research: https://ethresear.ch/t/a-zk-evm-specification/11549 The Ethereum Foundation (EF) is collaborating with several other teams; Polygon Hermez and Scroll are also building ZK-Rollups with EVM equivalence along very similar concepts. More and more people believe that the native implementation of zkEVM may arrive by the end of this year; however, it may take some time to mature and scale.

David Hoffman: How do you view the distribution of winners in the crypto space? Do winners capture most of the benefits? What is this "most"? What is your reasoning?**

Polynya: Clearly, winners will capture most of the benefits. Or rather, it’s an oligopoly. This is how technology has always operated, and the crypto space has stronger social consensus pressures. Strangely, I think there may be a long-tail effect due to the "religious" nature of the crypto industry.

David Hoffman: You tweeted a series of thoughts on the value accumulation of different layers (execution layer, settlement layer, data availability layer) (see below). Do you think the fat protocol thesis is invalid?**

Polynya: I added a reminder to that long tweet: quality money. Additionally, it depends on the use case. If you can create quality money and the main use case is DeFi, then this underlying asset will generate a lot of value.

David Hoffman: Also, can you talk about what the supply/demand flows of ETH will look like when a Rollup-centric landscape is fully established? When do you expect it to reach a steady state?**

Polynya: ETH will be used as currency throughout the ecosystem. Rollups will pay transaction fees (using ETH). Although the fee for each transaction is small, it will add up to a large number. I don’t want to say too much about this because it’s still too early!

Side Conversation

David Hoffman: Do you hold any NFTs? If so, which ones do you prefer?**

Polynya: Yes, mainly to try it out. Nothing special, although I did miss minting a free CryptoPunk because I had sold all my ETH at the time and was too lazy to buy some back to pay for gas!

David Hoffman: Where did you accumulate your blockchain knowledge? Was it self-taught?**

Polynya: Just curiosity, reading, and observing what people are building over the years, talking to some of them, etc. Rollups are interesting, and you can learn about them through reading. To be very clear, I only have a superficial understanding of Rollups. I am definitely not an expert, just an informed hobbyist.

David Hoffman: Do you hold traditional stocks? Which industries/companies?**

Polynya: Most of my portfolio is private equity! AMD is the only publicly traded stock I currently hold.