The Many Downsides of Scaling via Rollups

By Michael @ CryptoEQ | CryptoEQ | 19 Jun 2024

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Scalability Limitations

Rollups, by design, aim to enhance the Ethereum base layer's capacity by processing transactions off-chain and subsequently posting the data on-chain in batches. This approach has indeed facilitated a notable increase in transaction throughput. However, as the utilization of rollups expands, a series of challenges emerge, highlighting the intricate complexities of blockchain scalability and operational efficiency.

One of the primary constraints faced by rollups is the scalability ceiling imposed by Ethereum's block size limit, currently set at approximately 15 million gas. This limitation directly impacts the volume of data that can be processed and verified within each block, capping Ethereum's data throughput to around 937,500 bytes per block. Given that rollup transactions are aggregated and submitted to Ethereum in compressed batches, the actual capacity for processing rollup transactions is further restricted. Assuming an average size of 12 bytes per rollup transaction, Ethereum's theoretical limit stands at roughly 78,000 rollup transactions per block. With blocks being produced every 12 seconds, this translates into a theoretical maximum throughput of 5,200 to 6,000 transactions per second (TPS). However, this scenario presupposes the exclusive use of Ethereum's block space for rollups, an unrealistic assumption considering the network also supports native applications and transactions. Consequently, the practical TPS limit for rollups is significantly lower, likely under 5,000 TPS.

The operational complexities and scalability challenges are further compounded by the reliance on a single sequencer for transaction processing in some rollup solutions. This design choice can introduce bottlenecks and limit the system's overall efficiency, particularly for specific use cases and developers.

Layer 2 (L2) solutions like Optimism and Arbitrum, which maintain a close alignment with Ethereum's Layer 1 (L1) chain, face substantial operational costs. These platforms incur millions of dollars in expenses, paid in ETH, for settling transactions on the Ethereum main chain. Such costs can significantly impact the scalability and economic viability of rollups.

Moreover, rollups that build upon the Ethereum Virtual Machine (EVM) inherit the EVM's inherent limitations, including scalability issues, high gas costs, and computational inefficiencies. These constraints restrict the potential for rollups to offer dramatically improved performance and cost efficiency compared to the Ethereum network itself, which processes an average of 15-20 TPS under typical conditions. In contrast, dedicated scaling solutions like Arbitrum may achieve ~20-50 TPS, while other blockchains, such as Solana, boast significantly higher throughputs of ~300-600 TPS for non-vote transactions.

The substantial costs associated with utilizing Ethereum's L1 have spurred innovation, with emerging protocols like Celestia and EigenLayer seeking to "unbundle the L2 stack" by providing services to L2s at reduced costs. Additionally, alternative blockchains such as Solana, Aptos, and Sui offer distinct advantages, including faster and cheaper transactions, albeit with their own set of trade-offs for users and developers.

Rollup Fragmentation and Interoperability Constraints

The burgeoning growth of rollups is significantly influencing the cross-domain narrative within the blockchain ecosystem, particularly in the absence of a universally accepted global state, transport layer, or an in-built protocol for bridging and messaging. This scenario underscores a pivotal challenge: while rollups can harness liquidity and a degree of censorship resistance from their foundational layer, their capabilities for cross-rollup communication remain notably constrained. In essence, rollups function as isolated expansions of Ethereum's liquidity pool, resembling independent chains that encounter familiar hurdles in interconnectivity.

The concept of Shared Sequencing might offer a partial solution to these communication barriers for certain rollup clusters, yet the majority of existing and forthcoming rollups are poised to grapple with these issues. Factors such as the base layer's finality, congestion, and throughput further complicate these challenges. For instance, a user wishing to execute a "trustless" transaction from one rollup (Rollup A) to another (Rollup B) without resorting to a trusted third-party bridge—which introduces additional risk—faces significant delays. They must either await the verification of a Zero-Knowledge Proof (ZKP) following a series of supermajority epochs or endure the challenge period associated with an optimistic rollup before their funds can be transitioned to Rollup B's bridge contract.

This situation highlights a critical bottleneck in the current rollup-centric approach to scaling and interoperability within the Ethereum ecosystem. The reliance on external bridges, each with its own set of security and trust assumptions, underscores the nascent state of rollup interoperability and the pressing need for more integrated solutions. As the blockchain community continues to innovate, the development of more seamless and secure methods for cross-rollup communication will be paramount in realizing the full potential of these technologies for creating a truly interconnected and decentralized digital infrastructure.

User Experience

L2s add complexity, and that hurts user experience. Monolithic L1s like Solana, which centralize everything, have succeeded partly because they’re simple. Making using multiple L2s more fluid can be done with abstraction protocols like Socket, which let developers build apps that integrate different L2s and break down barriers. DeFi wallets and exchanges are also improving by abstracting the complexity within their interfaces. However, users still need to know where their funds are stored, as security varies across L2s.

Security Inheritance from L1 Ethereum

L2s are designed to inherit security from L1 Ethereum but introduce new components and mechanisms that create new attack vectors. While L2 security has come a long way, it’s not yet decentralized or mature. Stage 2 rollups, according to the L2Beat methodology, are key to L2 success. That means any token or smart contract on these L2s should have the same security as on Ethereum. That includes proof of transaction sequencing, being able to withdraw funds in emergencies, and no central control by any group of people. Arbitrum and Optimism are already working towards Stage 2, and that should happen within the next 2-3 years.


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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


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