Trying Synthetix over Optimistic Ethereum (Layer 2 scaling)

Trying Synthetix over Optimistic Ethereum (Layer 2 scaling)

By bengy | Idle Musings | 4 Oct 2020


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Ethereum is the first and most used of the smart contract blockchains. However, due to the way that it achieves consensus via Proof of Work (PoW), it does suffer from network congestion at times when the network is being stressed by usage. User interaction with Ethereum can range from simple token transfers through to the signing of smart contracts.... and this is the strength of the Ethereum blockchain, allowing for diverse use cases, from NFT based gaming through to the building of Decentralised Exchanges.

However, at the same time, it is the weakness of the Ethereum platform... as diverse and varied projects are all competing for the network's valuable computation power. This means that as certain projects or concepts suddenly go viral (Cryptokitties or DeFi)... other use cases are pushed into network oblivion as transaction fees spike and become a huge disincentive for all but the largest or most urgent transactions.

The latest round of DeFi mania on Ethereum has again highlighted the problem of scaling.... with fees getting to ridiculous levels for simple transactions. Token transfers were expensive... and smart contract interactions (which require more network resources and are thus more expensive to begin with) were astronomical in costs.

For me, that meant that I was leaving all my Ethereum interactions until the next month or two when the mania had died down and fees would return back to something resembling sanity... either that or waiting for the scalability upgrades that would come with ETH 2.0

This included leaving my Synthetix position sit at stupidly high collaterisation... 6000%! I'm not really in danger there!... but I"m not paying nearly 17 USD for a single claim, burn or anything!

 

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Thankfully, there are some layer 2 solutions that are already coming online. Synthetix (via their app Mintr) have volunteered to be a bit of a test subject for the Optimistic Ethereum implementation of Optimistic rollups.

Optimistic rollups are a scaling solution that are aimed at scaling smart contract interactions on the Ethereum network. So, similar to Plasma, but Plasma aims at scaling token transfers. Optimistic rollups sacrifice a bit of scaling to be able to handle the more complex smart contracts interactions.

Synthetix is one of the first platforms to help stress test the Optimistic Ethereum layer. This particular test phase aimed at retail users of the Synthetix platform, with a snapshot of all addresses that were holding a maximum of 2500 SNX (on Mintr or otherwise) being taken on the 24th of September.

Basically, if you log into the Mintr app... if you are eligible, you will see the notification banner at the top (see the 1st image).

 

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Jumping over to the Optimistic layer, we have the same Mintr front end that we have always known and "loved". One of the more annoying things about the SNX system was that you would stake your SNX to provide liquidity, but the rewards would need to be claimed every week (plus, they would be escrowed for a year). When Ethereum fees were low... it was annoying but manageable. However, as fees spiked... well, you were best just leaving things as they were and not bothering to claim your rewards.

 

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So, staking and claiming has been incredibly easy with the Metamask extension. You are just required to sign each transaction... there are no fees and the time for confirmation by the layer-2 is less than a second! This is the way that things should be... and for the moment, it will be an acceptable stop-gap between the current PoW Ethereum and ETH 2.0.

I don't think that it will be the permanent solution though... as it really ends up taking away the value proposition of ETH (which is to pay for gas fees). I guess that side of things will still be needed in the bundling of transactions from layer-2 to layer-1... but I wonder what will happen if dapps migrated en masse to Optimistic... there wouldn't be such a demand for ETH... Perhaps PoS wouldn't be necessary after all!

 

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As far as I understand, claims on the Optimistic layer will count for SNX on the main net as well... I haven't really looked at it that closely. But I have to say that I'm pretty damn impressed. It brings Ethereum usage back into play for all the non-whales out there... and smart contract interactions don't have to be an impossible barrier to mass adoption!

The future is looking better... and Ethereum really needs all the help it can get at the moment if it wants to keep it's lead as the premier smart contract platform!

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Originally published on my HIVE/STEEM blog!


bengy
bengy

I am a Musician (Violinist/Violist) specialising in Early Music living in The Netherlands. I have a background in Mathematics and Physics due to an earlier tertiary level study... and so, I'm still quite interested in Science and Technology related stuff!


Idle Musings
Idle Musings

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