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L2 Wars

As the development of the Ethereum core protocol becomes increasingly focused on scalability and support for Layer-2 rollups, the development of L2 protocols is being increasingly directed by a winner-take-all philosophy. At Devcon, all of the major rollup teams were present and ready to promote their specific value-add to ETH scalability. All of these L2s are aiming towards the same goal: grow Ethereum and democratize global access to secure L1 blockspace.

One of the biggest announcements was the Offchain Labs (Arbitrum) acquisition of Prysmatic Labs, an Ethereum core development team. This was met with some controversy, shaking up the L2 space and merging the L1 layer even closer to rollups.

The competitive and for-profit aspect of Layer-2 protocol development has many advantages, including greater financing, attention, and innovation speed. Given Ethereum's scalability being increasingly dependent on rollups, it’s crucial to mention the disadvantages.

Competition among L2s isn’t conducive to an honest appraisal of the flaws of rollups on Ethereum in general. As observed amongst projects using a zkEVM, more time’s been devoted to disparaging the accomplishments of competitors and announcing product launches faster than other competitors than to sincere reflection on a project's strengths and weaknesses. However, the crowd usually reacted positively when it was emphasized that rollups in their current state are incomplete and centralized. Therefore, we must make it a top priority to uphold the ideals in which we claim to believe.

zkEVMs are the next frontier in the rollup space and were on full display at Devcon. Announcements from three zkEVM teams were made during the week-long conference:

• Polygon's zkEVM public testnet went live
• zkSync announced its “baby alpha” for late October (live) and Layer-3 testnet, Pathfinder 
• Scroll has updated their zkEVM testnet

Ethereum Censorship

Speakers frequently posed questions and hypotheses regarding the infrastructure and mechanisms required to take Ethereum to the next level and achieve widespread adoption. In general, the consensus was that Ethereum needs improved censorship resistance and scalability. Many have stated that Ethereum can’t realize its goal of becoming the world computer without these attributes. For example, approximately 65% of Ethereum blocks are produced by censoring relays as of November 2022.

Background relays are the Ethereum infrastructure providers that allow validators to earn MEV via third-party block builders. The split of builders and proposers who submit and finalize blocks on Ethereum was designed to facilitate a more equitable distribution of MEV revenues among validators. This architecture, known as Proposer Builder Separation (PBS), was mostly conceived and designed by the Flashbots research and development team. Since deploying the original technology for PBS on Ethereum, Flashbots has been criticized for maintaining a relay and builder that adheres to U.S. restrictions and prohibits transactions that connect with the Tornado Cash smart contract.

Phil Daian, Co-Founder of Flashbots and Co-Founder of the S.U.A.V.E. Project, addressed concerns about the increasing number of censored blocks on Ethereum as a result of the Flashbots relay and builder. He spoke candidly about the need for increased competition to reduce Ethereum's reliance on Flashbots products. Daian also disclosed the Flashbots team would begin developing and designing a new encrypted mempool for Ethereum that would have inherent censorship resistance and decentralization. During the presentation, no information was provided regarding the implementation of this project, codenamed Single Unifying Auction for Value Expression (SUAVE). The early code specs for SUAVE will be open-sourced on GitHub in a few weeks, according to Daian, although it’s difficult to evaluate the project's efficacy or applicability without more information.