Are Ethereum’s scaling solutions disrupting the ecosystem?
The transaction fees on the Ethereum mainnet have so far been disappointing and have been widely criticized, with transaction fees rising steadily for at least a year. As the world’s largest smart contract platform grows in popularity, the fees associated with every transaction also escalate as the network becomes increasingly congested.
This year’s NFT craze has accelerated this trend and perhaps it is time for the average user to get used to the idea of not making transactions over the Ethereum mainnet as mainnets are used to conduct high quality transactions issued by the Ethereum mainnet scaling solution.
In fact, many in this area are proposing to stop trading on the Ethereum mainnet and move to scaling solutions (layer 2) such as the newly released Optimism, Arbitrum and Starknet.
For users who don’t care too much about Ethereum, don’t care much about decentralization, and are often new entrants, look for platforms with high transaction throughput and almost zero fees. Few people found the success of Layer 1 systems like Solana, Avalanche, and Ethereum sidechains like Polygon – a surprise.
How high is the network usage?
From a technical point of view, users should only transact on the Layer 2 network when using daily applications on Ethereum, and leave the mainnet for high quality transactions, transactions from the scaling solution. In the long term, the Ethereum Mainnet should only be used for scaling solutions.
Scaling solutions on Ethereum, also known as rollup, is a technology that separates the execution layer on Ethereum and rolls transactions into a pool, thus consolidating the entire pool into a single transaction on the Ethereum mainnet, compressing transaction data and blocking the need for space .
The gas fee required for a pooled mainnet transaction is essentially divided equally between all the individual transactions contained in the pool, which reduces the fee per transaction. Additionally, the separation of the execution layer allows for optimization of transaction throughput, resulting in near-instant transactions and a better user experience, while maintaining the decentralization and security of the mainnet Ethereum. Sidechains do not have this advantage, however, and maintain their own set of validation nodes.
From a usability perspective, this has its own limitations. Most notable of these is the separation between various decentralized applications and scaling solutions. For these reasons, code maintenance and security developers on both sides are forced to port their code to other platforms. While scaling solutions are similar in terms of compatibility with Ethereum (Ethereum Virtual Machine), they are not exactly the same.
Initially, teams had to choose a scaling solution to deploy their applications. This leads to a situation where users choose a specific scaling solution based on the application they want. Since each scaling solution operates a different network than the Ethereum mainnet, users who prefer to use multiple applications must send funds over a bridge to an incompatible network.
For example, an NFT is purchased or minted from a service that runs on Arbitrum. Users cannot sell this NFT through the service running on Optimism unless it is connected to the network. As a result, owners have to pay transaction fees on the mainnet. In a situation like this, the user must have credits on both networks. In fact, a lot of people have paid for 4 to 5 different Layer 2 networks to work.
As a result, they have to keep money in multiple Layer 2 networks, switch between networks depending on the service they want, and move money between networks to where they need it.
Only time will tell how this will turn out as current course points to many short term scaling solutions. However, it cannot be ruled out that they will all converge in the long run. This usually happens when the market matures. Either way, it seems time for users to move to a scalable solution and prepare for a future of network divisions, far from a practical single network.
As transaction fees seem to be increasing all the time, users can get into a “slow death” situation as high fees keep making trading more expensive.
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