Haust Network scaling solutions
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The issue of scaling the Ethereum network has been pressing for many years.
Numerous projects that launched on the Ethereum network have become non-viable due to excessively high transaction fees. In fact, only so-called “whales” with significant capital can actively use the Ethereum network. For ordinary users, paying transaction fees that can reach $200+ becomes impractical: the income does not cover the expenses on fees. As the issue of scaling has been addressed for a long time, numerous different scaling solutions have been devised to date. Next, we will discuss the scaling methods, understand the terminology, and understand why sidechains are not considered L2 solutions.
First of all, it is necessary to define the terminology. L1 scaling solutions are methods to increase the network’s throughput by upgrading its protocol.
For a long time, sharding was chosen as the main method of scaling Ethereum. In Ethereum, each node processes all transactions. Sharding involves dividing the blockchain into different parts (shards). Transactions in each shard are processed in parallel, which increases the network’s throughput. Each shard must have its own set of validators. Thus, an individual node does not need to process all transactions in the blockchain, which significantly reduces its load and allows the network to process more transactions per unit of time.
Initially, it was assumed that sharding technology would be implemented in Ethereum before the Proof of Stake merge, but the development of the technology took much longer than expected, and currently, the primary method of scaling chosen is L2 solutions, which we will discuss below.
By definition, an L2 is a network built on top of Ethereum that relies on Ethereum’s security. An L2 network has its own set of validators and may have a different consensus mechanism.
So what does it mean to “rely” on security here? It means that data verification in the L2 network is carried out using the L1 network, i.e., Ethereum.
A rollup is a network that operates in parallel with Ethereum but records transactions on the main network. In the Ethereum network, transactions are verified for validity.
There are two types of rollups based on the method of transaction verification: optimistic and zk-rollups.
Optimistic rollups form batches of their transactions and record them on the main network in a compressed form, which makes this recording cheaper. Since transactions are not directly executed on the Ethereum network, and due to the savings on the recording format, significant gas savings are achieved, making transaction recording cheaper. In optimistic rollups, the data recorded on the network for L2 transactions is considered valid, but a certain period is given to contest the recorded data. There is a potential risk that if an invalid transaction is not contested within the allotted time, it will be recorded on L1 as valid.
ZK-rollups are also networks that operate in parallel with Ethereum, but they have a different method of verifying the validity of recorded data. They also form batches of transactions, but a summary of these batches is recorded on the L1 network, along with cryptographic proof of the validity of the transactions in the recorded summary.
ZK-rollups are probably one of the most promising methods of scaling Ethereum at the moment because, unlike optimistic rollups, the recorded transaction data is cryptographically confirmed along with the recording, and there is no need to wait for the end of the contestation period to ensure it will not be revoked. However, the mathematical complexity of ZK-proofs imposes its own limitations: verifying general-purpose EVM computations is a very complex task, so active development is currently underway in this area.
A state channel is a technology that allows a group of participants to exchange numerous transactions among themselves but record only two transactions on the main network: the initial and the final transaction.
How does it work? A multisig smart contract is deployed on the Ethereum network. This contract ensures that the transactions are signed by the necessary participants. The participants of the state channel deposit funds into this multisig contract. After this, they interact off-chain. At the end of the interaction, the participants sign the final result of their interaction. The smart contract then distributes the funds according to the recorded result.
Plasma chains can be considered an intermediate solution between rollups, where all transactions are fully verified on the L1 network, and sidechains, where such verification is absent.
The idea behind Plasma chains is that not all transactions require verification by all Ethereum nodes.
A Plasma chain periodically records the result of its operations as a cryptographic proof of the current state of the network. The data of this state is not recorded, but the proof itself is small in size. Thus, the validity of the transactions is not verified, but once a commitment is recorded on Ethereum, the Plasma chain cannot retrospectively alter the transaction history.
In terms of architecture, Validiums are similar to zk-rollup solutions, with the only difference being that the data for transaction verification is stored off-chain. This allows for higher throughput and lower fees but comes at a cost: Validiums are less secure than zk solutions. Without the data on the L1 network, the Validium operator can potentially prevent a user from accessing their funds.
A sidechain is a separate blockchain that operates independently of Ethereum and is connected to Ethereum via a two-way bridge. Unlike rollup solutions, the L1 network does not verify transactions in the sidechain. Therefore, the security of the sidechain is entirely dependent on its own implementation. However, this independence from the L1 network allows for a wider range of architectural possibilities for implementing sidechains.
We see that numerous attempts have been made to scale the Ethereum network, with varying degrees of success. Undoubtedly, scaling the L1 network itself would be the most logical and user-friendly approach, but it has proven to be fraught with significant technical challenges. Therefore, at present, our team has chosen to focus on scaling through L2 solutions. Rollup solutions have gained the most popularity, providing the highest security among alternative solutions. Considering the latest Ethereum update (DenCun), which significantly reduces the cost of recording data for verification in the L1 network, rollup solutions have a clear advantage over Plasma and Validiums: greater security with negligible additional data availability costs.
Scaling through rollups increases overall throughput without significant security compromises, but this solution has its drawbacks. One of the main issues is that liquidity is spread across different networks, and there is additional complexity in bridging assets between various rollups. To address this, we are developing a set of smart contracts (Haustorium) that will interact with liquidity in other blockchains and allocate it to profitable staking programs. As a result, assets in a user’s Haust wallet will automatically increase daily, earning staking income.
This approach is safe for the user, as they receive their assets on a 1:1 basis in the Haust network and can withdraw to another network at any time. Staking is conducted without lockup periods and with minimal risks.