What is The Best Way to Scale L1 Blockchains?
Read in 4 mins
In this episode of Bell Curve, Mike, and Myles are joined by Kalman Lajko and Preston Evans to discuss their thesis behind the optimal Rollup stack, the similarities and key differences between the Slush and Sovereign design thesis, and how developers choose the optimal stack for their product, and more!
Read our notes below to learn more.
The Internet of Rollups
Preston from Sovereign Labs and Kalman from Slush SDK discuss their visions for the internet of roll-ups.
Roll-ups are blockchains that outsource some of their security to another chain and believe that the internet of roll-ups will allow for much faster innovation in Layer 1 blockchains.
They are building the Sovereign SDK, a tool that is inspired by the Cosmos SDK but is specifically designed for application-specific roll-ups.
They use zero-knowledge proofs to allow roll-ups to communicate with each other in a way that is trust-minimized.
Their ultimate goal is to create an ecosystem of roll-ups that are able to communicate with each other seamlessly.
Slush vs Sovereign
Roll-Ups are layer 2 scaling solutions that allow for increased transactions per second and reduced fees on the blockchain.
There are different types of Roll-Ups including Smart contract Roll-Ups, Layer 3s that are built on settlement Roll-Ups, and Sovereign Roll-Ups.
They compare the advantages of each and their approach to building a minimum viable stack that balances ease of use with customizability and configurability for developers.
The Sovereign labs team takes a first-principles approach to building Roll-Ups, while the Slush team focuses on interoperability and building on well-established platforms.
It is important that the same virtual machine is used and cryptographic primitives for ease of use and interoperability.
There are different needs for building on the StarkNet layer as opposed to the design principles that went into the Cosmos SDK.
The Ethereum ecosystem is more focused on security and the need for decentralization, cheap data availability, and fast bridging.
The slush and Cosmos SDK stacks differ in terms of flexibility and they aim to support virtual machines.
There are risks associated with bridging between different virtual machines and are focusing on how to ensure that the virtual machines are secure and follow their own rules.
There is a need for smart contracts that can interpret the state of other chains and ensure that a malicious chain does not affect other chains connected to it.
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Business models and monetization
It is challenging to monetize directly in a decentralized ecosystem where everything is open source and forkable.
They suggested possible monetization strategies such as premium support, finder's reward, and providing infrastructure services.
However, they emphasized the need to have a working product before worrying too much about monetization.
A winner-take-all market?
The potential winner-take-all or winner-take-most scenario in the end-state market structure of roll-up or app chain stacks could result from the use of a common standard virtual machine.
A standard virtual machine has benefits such as strong network effects, and how it enables interoperability between all of them.
Sovereign Labs and Slush have their differences in their approaches to interoperability, with Sovereign Labs being more bottom-up and customizable and Slush being more scalable and looking to recruit as many apps as possible.
Bridging assets between chains does not necessarily involve accepting risks from that chain.
Attracting developers
It’s still early to focus heavily on business development and recruiting application developers.
Currently more focused on building a product that users will love, and they have received a surprising amount of inbound communication from teams eager to build demo applications with them.
There is a huge demand for cheap transactions and block space, and app developers want to run their own chain to make it cheaper for their users and to collect revenue.
The demand will mainly come from new entrants to the space, and it will take time to see the adoption of these new architectures.
Infrastructure and developer tooling
It is important for infrastructure for user onboarding to be in place, such as block explorers and developer tooling.
They prioritize backward compatibility and sensible design decisions to ensure existing tools and infrastructures work.
They are still in the early stages of thinking about wallet designs and may not have anything ready to announce for quite some time.
Recap: Post-Interview
Sovereign Labs is taking a full-stack approach to building app-specific Roll-Ups, while Slush is settling on a shared L2 on Ethereum.
Important to balance distribution with building and the need to focus on branding and positioning in the market.
It is important to be nimble and pivot to meet market demand.
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