L1 vs L2: Entering The Endgame

DEC 07, 2021 • 15 Min Read

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN SOL, ETH, AVAX, DYDX, IMX, LUNA, OFF-CHAIN LABS (ARBITRUM), DVF, RUNE & ZKSYNC. MEMBERS OF OUR TEAM ALSO HOLD ATOM & DOT. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE

Key Takeaways

  • Monolithic chains are bounded by what a single node can process, whereas modular ecosystems surpass this limitation, offering a more sustainable form of scaling.

  • A key motivation behind modularity is efficient resource pricing. Modular chains can offer more predictable fees by separating applications into different resource pools (i.e. fee markets).

  • Modularity, however, introduces a new problem known as data availability, which can be addressed several ways. Rollups, for example, batch off-chain data and submit it on-chain. By making the “data available” on-chain, they overcome this issue and inherit the underlying security of the base layer, establishing trustless L1<>L2 communication.

  • The newest form of modular chains, known as specialized data availability (DA) layers, is designed to act solely as a shared security layer for rollups. Given their scalability advantages, DA chains may become the end game of blockchain scaling. Celestia is the pioneering project on this front.

  • ZK-Rollups can offer more scalability than Optimistic Rollups, which is already being seen in practice. dYdX, for example, has been processing roughly 10x more throughput than Optimism while consuming 1/5th of it’s L1 footprint.

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