The Big Four smart contract rollup chains — Arbitrum, Optimistic Ethereum, zkSync 2.0 and StarkNet

Originally posted on r/ethfinance on 7th June 2021.

I’ve talked about rollups at length in my previous posts, and this is without any doubt the biggest paradigm shift in this industry since Ethereum introduced smart contracts in 2015. We’ve had application-specific rollups live for over a year now, but now it’s time to take the next step and release fully programmable smart contract rollup chains. This post is a brief summary of the Big Four smart contract rollups. Before you ask, no, they don’t have tokens yet, but I believe all 4 will have tokens in the future, with zkSync most likely to be the first to a token. If you want to gain exposure, invest in application protocols deploying to them, and the L1 these rollups choose. (Currently, all Ethereum, for obvious reasons.) Yes, there are other players entering the space — OMGX, Polygon, Cartesi etc. — but we know much more about the big 4. Be rest assured this is where all activity will happen over the coming years, the days of “Eth killer” is over, the era of “Arbitrum killers” begins.

Arbitrum

Offchain Labs’ first chain, Arbitrum One, has been deployed on mainnet. Several high-profile apps like Uniswap V3, Maker, SushiSwap, Aave have either already deployed, or committed to soon. If you ever wanted evidence that it’s easy to deploy Ethereum smart contracts on Arbitrum — this is it. This makes Arbitrum One already the most adopted chain by developers after Ethereum. All that’s remaining is to open the floodgates to users, which will happen when there are enough dApps deployed. My guesstimate is end of June. You’ll be able to make, for example, Uniswap V3 swaps for a few dozen cents, while still backed by the massive decentralization, security and network effects of Ethereum. I believe this is when it’ll dawn on retail investors that the future of the entire blockchain space is rollups.

Arbitrum is an optimistic rollup, with a multi-round interactive dispute mechanism for fraud proofs. Optimistic rollups have a 7 day withdrawal period, though multiple projects like Hop, Connext, Celer, Maker’s DAI bridge are working on mitigating this with fast withdrawals through liquidity bridges. Arbitrum’s fee market — ArbGas — is inspired by EIP-1559 to offer users predictable gas fees. You pay gas in ETH. Arbitrum One is capable of up to 5,000 TPS, though they’ll be running with lower speed limits early on. Of course, Arbitrum and other rollups’ throughputs will increase alongside Ethereum’s upgrades. When data sharding releases, scheduled for late 2022, all rollups combined will accelerate to 100,000 TPS.

They plan to decentralized fully by summer 2021.

Optimistic Ethereum

Optimistic Ethereum, build by Optimism PBC, was once the frontrunner. Indeed, technically, they are the first to deploy to mainnet as early as January 2021. However, since then only Synthetix has been whitelisted, and Optimism have done a generally poor job at communicating. They’ve lost their leadership position to Arbitrum decisively, at this time.

Optimistic Ethereum’s chief goal is to align with Ethereum L1 as closely as possible. They largely reuse the EVM and Geth with as few changes as possible, and will track all Ethereum L1 execution layer upgrades closely. Unlike Arbitrum, OE uses a single-round fraud proof mechanism. (I’m not going into further details here) OE offers similar throughput to Arbitrum, though it currently lacks BLS signature aggregation. You pay gas in WETH.

The next major application to deploy on OE will be Uniswap V3, joining Synthetix and Chainlink. A full public launch is scheduled for July, though I’m not optimistic given Optimism’s recent failures with communications & PR.

zkSync 2.0

zkSync 2.0 is the first programmable ZK rollup, currently in testnet. ZK rollups have several key advantages over optimistic rollups, chiefly more advanced aggregation techniques and most importantly, instant withdrawals. For many, ZK rollups are considered the final form of scalable blockchains. Indeed, most of the application-specific rollups live since last year are ZK rollups, it’s just been a challenge to make them programmable… until now.

Unlike Arbitrum and OE, zkSync 2.0 runs a custom VM based on LLVM. It has two compilers — Yul and Zinc. Through Yul, zkSync 2.0 supports Solidity, so you could deploy Solidity apps with very little changes on zkSync 2.0, similar to Arbitrum or OE.

In addition to rollups, zkSync 2.0 will also feature a zkPorter mode, accelerating to 100,000 TPS. This is not as secure as the ZK rollup option or Ethereum, but are significantly more so than other chains, and will allow an attractive option for negligible fees. Remember, while rollups bring significant savings over Ethereum, they are still going to be more expensive than centralized sidechains/L1s. zkPorter fixes that.

I’ll note that programmable ZK rollups are still a very nascent technology at the absolute bleeding edge, so there’s a bit more technical risk involved with zkSync 2.0 versus OE or Arbitrum which use traditional primitives. However, Matter Labs have a few months on testnet to prove that it works just fine.

zkSync 2.0 is scheduled to release in summer 2021 (I’d guesstimate September) with zkPorter in late 2021.

StarkNet

Lastly, StarkNet. StarkWare’s StarkEx solution has been live for an entire year now, and powers DeversiFi, dYdX and Immutable X. If you want a showcase of rollup tech today, it doesn’t get much better than dYdX. Instant trades, zero gas fees, it’s as perfect as a CEX, except it’s fully decentralized! I’m skipping the StarkNet Planets phase, because we’re all about smart contract chains with a common state here.

That happens with StarkNet Constellations, a direct competitor to zkSync 2.0. Like zkSync 2.0, StarkNet uses ZK/validity proofs with instant withdrawals, but unlike zkSync 2.0, StarkNet uses ZK-STARKs (versus PLONKs for zkSync 2.0, again, not going into details here). A side benefit to ZK-STARKs are that they are quantum resistant. Indeed, Ethereum’s plan for quantum resistance later this decade is to ZK-STARK the entire blockchain. StarkNet delivers that this year, in Q4 2021.

Unlike all of the rollups mentioned above, StarkNet requires programming in their own language — Cairo, and has a custom VM. While there are some rumblings about transpilers for Solidity and other EVM programming languages, there’s no word on this so far. StarkWare claim Cairo and StarkNet will enable a new class of applications not possible on L1. StarkNet may end up being the most technologically advanced smart contract chain on the planet, but will developers abandon their L1 codebases for Cairo? It’s definitely a different approach, and it’ll be curious to see how things play out.

It’s not known if StarkNet will have a zkPorter-like counterpart (indeed, it was StarkWare that invented the Validium model zkPorter is based on) though this is definitely technically possible.

StarkNet is scheduled to decentralize fully with StarkNet Universe in Q1 2022.

Concluding

I’m rooting for all rollups. This is, without a doubt, the blockchain industry’s first and best shot at gaining mass adoption while still being highly secure and decentralized. My current thought is that Arbitrum has the first-mover advantage, but zkSync 2.0 has the potential to offer the best balance of features across the board. Optimistic Ethereum has still time to redeem itself, and being closely aligned to L1 may be beneficial in the long term. StarkNet are doing something a bit different, but I can totally see a new class of applications skip L1 and Solidity/Vyper entirely and go straight to StarkNet. Indeed, we already have examples of this with dYdX and Immutable X.

Finally, I welcome all competition, and I’m curious to see what the likes of OMGX and Polygon add to the space. I also expect L1s to make the transition to being rollups or at least offer an option. Particularly some of the smaller L1s (NEAR? xDai?) with negligible adoption after years of effort have nothing to lose and everything to gain. Let Arbitrum be the best inspiration — like I mentioned, it’s already the most adopted chain by developers after Ethereum within a matter of days. Also crucial are projects that like Hop, Connext, Celer, Maker etc. that are working on interoperability and composability between L2s.