Perspective by: Jay Jog, co-founder of Sei Labs
When CryptoKitties overwhelmed the Ethereum network back in 2017, the broader community faced a stark reality regarding blockchain scalability. With over $100 billion currently invested in decentralized finance (DeFi) and a thriving market for non-fungible tokens (NFTs), that lesson remains particularly pertinent today. The Ethereum Virtual Machine (EVM)—the core engine driving these activities—is approaching its operational limits.
The primary response from the crypto space has been the development of layer 2 solutions—independent chains that handle transactions and report back to Ethereum. However, what if the search for solutions has been misguided?
Layer 2s may not be the answer
Layer 2 blockchains have been championed as the remedy for the EVM’s performance issues, primarily because they can transfer computation from Ethereum to another chain. Yet, these layer 2 solutions have turned out to be mere stopgaps rather than lasting fixes, as many had anticipated. Reports indicate that a new layer 2 emerges approximately every 19 days in 2024, suggesting that the competitive landscape may be creating more complications rather than alleviating existing ones.
These layer 2 solutions introduce their own set of problems, particularly regarding centralization and interoperability. Many current layer 2 blockchains rely on centralized sequencers that risk issues such as transaction censorship and reordering. Additionally, in a recent blog entry, Vitalik Buterin pointed out the interoperability struggles facing these solutions, highlighting their chaotic state and the resulting fragmentation of liquidity, which complicates the user experience.
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Innovative rollup designs have attempted to address these shortcomings. Recently, the advent of native rollups aims to confront centralization issues inherent in layer 2s. However, native rollups often detract value from projects, which will likely impede their adoption. Therefore, it remains questionable whether native rollups will provide comprehensive solutions for Ethereum’s pressing concerns.
Given that layer 2s face as many challenges as the EVM does, why should we continue to lean on them rather than explore alternative options? Is there a more effective solution? According to recent analyses, the annual expenditure to operate all significant L2s is approximately $95.53 million. Instead of funneling additional resources into developing more layer 2s and interoperability solutions, wouldn’t it be wiser to enhance the existing foundational layer?
A more precise alternative to traditional TPS
To establish the most efficient layer 1s, the industry needs to reassess how it measures blockchain performance. Many blockchain platforms emphasize throughput through the lens of transactions per second (TPS) to evaluate performance. While some argue that maximizing TPS is crucial for mainstream crypto adoption, the metric unfortunately fails to provide meaningful comparisons since different transactions demand varying levels of computational resources.
For instance, an Ether (ETH) transaction requires 21,000 gas units, while an ERC-20 transfer demands 65,000, demonstrating that TPS offers little insight when monitoring mass transactions and network performance.
Establishing a new standardized performance metric that truly represents a network’s computational capabilities is essential. This is where the concept of “gas per second” comes into play—a metric that assesses the gas fees needed for transaction processing, effectively reflecting various transaction types. While TPS serves well to evaluate simple ETH transfers, gas per second captures the overall landscape by accounting for all computational activities, including more complex transactions.
Given the novelty of this measurement, assessing gas per second across all chains will require considerable time, but it is a vital step in the evolution of blockchain technology.
Returning to the fundamentals: Layer 1s
The potential of layer 1s has often been underestimated, as much of the focus among Ethereum researchers has been on a rollup-centric strategy. Layer 1s serve as the foundation of the entire crypto ecosystem, making them crucial for enhancing the EVM. To tackle the scalability issue of the EVM, layer 1s must consider rebuilding the EVM from the ground up, prioritizing performance above all else.
The EVM currently faces significant congestion and rising gas fees due to increasing transaction volumes. It is imperative for layer 1s to scale their infrastructure in order to welcome a new wave of users. Strategies like parallelization can enhance throughput, and coupled with modernization of the EVM’s consensus mechanisms and storage solutions, a new benchmark for performance can be established, fostering a more developer-friendly environment for projects.
The right path to scaling the EVM
For the past several years, layer 2s have been depicted as the ideal solution for facilitating quick and cost-effective transaction execution. However, layer 2s do not address the fundamental needs of the EVM. Since the outset, layer 1s have been the true key to resolving the EVM’s scalability challenges.
It is time to embrace more precise performance metrics and shift the focus toward enhancing network functionality. Such advancements will unlock the EVM’s full potential, introducing unprecedented levels of scalability and efficiency. The EVM is here to remain, but its future hinges on the collective efforts of the industry.
Perspective by: Jay Jog, co-founder of Sei Labs.
This content is intended for general informational purposes only and should not be regarded as legal or investment advice. The opinions expressed here are solely those of the author and do not necessarily reflect the views of any specific organization.