Breaking down Ethereum’s evolution and its impact on crypto markets Was this newsletter forwarded to you?Sign up here. |
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As of October 25, 2022 @ 21:48:11 UTC. |
Welcome to Valid Points! More than $3 billion has been locked up on Arbitrum and Optimism, Ethereum’s two biggest layer 2 rollups – networks that offer cheaper fees and faster fees without, supposedly, compromising on security. As the wider Ethereum ecosystem shifts to a rollup-centric road map, what has been underappreciated is that existing solutions remain riskier and more centralized than most users realize. → In this edition of Valid Points, we’ll dive into some of the reasons why Ethereum’s incumbent rollup networks cannot currently claim that they “borrow” Ethereum’s security. – Sam Kessler |
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Rollups Don't Borrow Ethereum's Security |
(Luigi Pozzoli/Getty Images) |
There’s a reason why blockchain alternatives like Solana (pitched as an “Ethereum killer”) and then Aptos (a “Solana killer”) debuted. |
- Ethereum can be prohibitively slow and expensive.
- The blockchain became virtually unusable for most people at the peak of crypto’s most recent hype cycle, when something as simple as swapping one token for another could have cost upwards of $40.
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But what about those wanting to keep transactions in the Ethereum ecosystem? Enter: Layer 2 rollups. They run parallel to Ethereum, augmenting its ledger and delivering lower fees without, in theory, compromising security. To date, more than $3 billion in Ethereum user funds have been locked up on Arbitrum and Optimism, the largest rollup networks. Rollups bundle up transactions and then pass them back to Ethereum, where the entire batch of transactions is added to the ledger in one fell swoop. That can cut costs dramatically. Arbitrum and Optimism boast fees around 95% lower than those of Ethereum’s base chain. Additionally, they are marketed as more secure alternatives to so-called sidechains and commit chains – networks that pass transactions to Ethereum with little more than a “pinky promise” that they reflect real user activity. Unlike trust-based sidechains, layer 2 rollups have special systems to guarantee that transactions aren’t spoofed or altered before they are passed back to Ethereum's main chain. The problem? As they’ve grown in popularity, what has been underappreciated is that they’re riskier and more centralized than most users recognize. While Ethereum's rollup networks aim to achieve equivalent security to Ethereum itself, virtually all existing rollups currently require that users trust the rollup’s own, centralized operators – rather than Ethereum’s vast network of operators – to know that funds are safe. The takeaway: Ethereum’s incumbent rollup networks cannot currently claim that they “borrow” Ethereum’s security. While transacting on these networks will eventually be as safe as transacting on Ethereum’s main network, planting money on Optimism and Arbitrum today means placing a tremendous amount of trust in the integrity of their developer teams and the quality of their code. Read the full article here. |
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The following is an overview of network activity on the Ethereum Beacon Chain over the past week. For more information about the metrics featured in this section, check out our 101 explainer on ETH metrics. |
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Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network. |
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Polkadot Co-Founder Gavin Wood steps down from CEO role at Parity Technologies. - WHY IT MATTERS: While shaking off his CEO title at Parity Technologies, the key backer supporting the Polkadot ecosystem, the longtime crypto developer still remains a majority shareholder in Parity Technologies. In a statement shared with CoinDesk, Wood said he will focus on making Polkadot “more relevant to large swathes of the population” in his new role as chief architect. “This will begin by helping the community ensign and build several interesting chain-integrated social primitives which I think are crucial for us to deliver a true Web3 platform.” Read more here.
Ripple’s Director of Engineering Nik Bougalis leaves the firm as XRP turns 10 years old. - WHY IT MATTERS: At Ripple, Bougalis oversaw a series of developments to the ledger’s code base including the introduction of non-fungible tokens. Bougalis’ departure comes as Ripple begins testing an XRP ledger sidechain that’s compatible with Ethereum-based smart contracts, On Oct. 21, Bouglais tweeted, “My decade-long journey at Ripple has been a fantastic (if exhausting and all-consuming) one. I got to work on a project that I love, towards a goal I believe in. But that journey will be coming to an end in a few weeks.” Read more here.
The MakerDAO community approved a proposal to place as much as $1.6 billion USDC in Coinbase Prime, Coinbase’s institutional custody service. - WHY IT MATTERS: As a result of placing up to $1.6 billion of USDC in Coinbase Prime, MakerDAO will yield 1.5%. “This proposed collaboration with Coinbase (COIN) follows an approved signal of intent by the MakerDAO community to increasingly invest Maker’s collateral into short-term bonds,” Jennifer Senhaji, growth and business development lead at MakerDAO. Last week, it was reported that 88% of the community votes were in favor of the proposal. Read more here.
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Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post. You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb. Search for it on any Ethereum block explorer site! |
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