Rollup-centric Ethereum roadmap: November 2021 update

Overwhelming demand for the Ethereum network combined with by-design constrained supply has in recent months led to skyrocketing gas fees. This has had a knock-on effect with rollups also seeing significant increases. Currently, AMM swaps cost ~$5 on optimistic rollups and ~$1 on zk rollups — which is too damn high. Do note that these are still very early beta & unoptimized rollups. Neither Optimistic Ethereum nor Arbitrum One have implemented data compression. With compression, we could see these fees go down by 10x. ZK rollups do have very efficient compression implemented, but early rollups have a different issue — not enough activity. The good news is as activity goes up, the transaction fees on zkRs will decrease significantly — especially STARK rollups. But optimizations and building activity will take time, and even then, it’s not enough.

Back to Ethereum, the long-term solution has always been data sharding, but with the community and developers opting to prioritize The Merge instead, has been pushed back to late 2023. We need shorter-term solutions. Vitalik details an update to how we can unlock as much data availability for rollups as quickly as possible. For details, please read that. Here, I’ll just state my quick (PS: lol, maybe it’s not so quick after all) opinion & speculation on the matter.

With rollups, especially ZKRs, the whole “TPS” thing is irrelevant. But for illustrative purposes, I’ll add what the average TPS at each step would be for a ERC20 transaction. For dYdX transactions, multiply this number by 3. (Yet another point of evidence that TPS is useless — one would have thought highly complex derivative trades with cross margin, oracle updates multiple times a second etc. would cost less than a simple ERC20 transfer.)

Step 1: EIP-4488/90

EIP-4488 will decrease calldata costs by 5.33x (EIP-4490 is 2.66x), though throughput only sees a minor bump to 5,000 TPS. How much this will decrease fees by is a complex matter (see my post above), but at constant demand, we should expect ~5x for optimistic rollups.

Step 1.5: Optimized rollups

With ZKRs, things are a little more complicated — it totally depends on how much activity there is. If we see a ZKR take off in a big way, the verification costs will essentially be amortized to negligible, and the calldata costs will dominate. So, your dYdX transaction will cost only 16.1 gas, and the baseline ERC20 transaction 48 gas. 10x is definitely possible — especially for STARK rollups, so once again, we’re at 50x from today.

Step 2: Few data shards

With 4 shards, in addition to EIP-4488/90, we’re now looking at ~10,000 TPS. As for cost, we’ll see dedicated fee markets on data shards starting from zero, and I expect transaction fees to more than halve. It’s unclear to me how the execution layer’s calldata market will work in tandem with the new shards, though. Speculation on timelines: it’s implied to be similar in scope to Altair. Given that, I’d say early 2023 is a reasonable target.

Step 3: 64 data shards

When does this happen? Again, totally speculating here: late 2023 is possible, but conservatively, it could be early 2024 due to Step 2 coming first.

This means, at constant demand, we can expect transaction fees on rollups to plummet by over 1,000x from the status quo on rollups today. But, of course, this is a very naïve illustration. It doesn’t mean that fees are going to be $0.0001 or something — of course there’ll be massive demand induced by these lower fees. On the flip side, a lot of the overwhelming demand for Ethereum is due to speculative activity in a bull market, which will almost certainly vanish in a bear market. Indeed, just 5 months ago, gas price was 10 gwei, and swaps even on unoptimized rollups were $0.30 or so. So, it’s really hard to say where thing settle. But the important thing to know is that we’ll have massive capacity with very low fees on rollups in a couple of years.

Step 4: Data availability sampling

(For those wondering — what happened to “Ethereum 2.0” execution shards? My speculation is those will never happen, and Ethereum shards will be data-only. Rollups & data sharding in tandem are simply a far superior solution than execution sharding. Instead, the Ethereum execution layer will head straight to zkEVM sometime mid-2020s, and then, if required, we can have zkEVM-shards late-2020s. Totally speculating here, though. I know some still want to make execution shards happen.)

Speculative steps: Expanding data shards

Elephant in the room: volitions

Endnotes

Discussion here: Rollup-centric Ethereum roadmap: November 2021 update : ethfinance (reddit.com)

Rants and musings on blockchain tech. All content here in the public domain, please feel free to share/adapt/republish.