Scaling

Scaling¶

The two most important blockchain networks today, Bitcoin and Ethereum, both face the issue of low native network TPS. When transaction volume increases, these networks tend to become slow and expensive. Scaling refers to the ability of a blockchain network to increase its processing capacity and performance.

The main challenge of blockchain scaling is improving network performance while minimizing the impact on network decentralization and security.

The Bitcoin and Ethereum communities are each researching different on-chain and off-chain scaling solutions.

Bitcoin Scaling¶

Bitcoin On-Chain Scaling¶

Also known as Layer 1 scaling, this primarily achieves scaling by increasing the blockchain's own block capacity. Typical scaling solutions include: larger blocks and Segregated Witness.

Larger Blocks: By increasing the size of each block, more transactions can be accommodated. For example, Bitcoin Cash increased the block size from 1 MB to 8 MB, achieving higher transaction processing capacity.

Segregated Witness: Extracts digital signature information and places it in a new data structure. This allows more transaction data to be stored in a single block, increasing the effective block size without increasing the block size limit, thereby increasing network transaction throughput.

Bitcoin Off-Chain Scaling¶

The main idea is to move transactions from the blockchain network (commonly called Layer 1) to off-chain (commonly called Layer 2) execution, reducing the burden on Layer 1. Typical scaling solutions include: the Lightning Network and various sidechain and Rollup solutions.

Lightning Network: Both parties in a payment establish an off-chain "channel." Both parties can make multiple payment transactions in this "channel," and when settlement is needed, the channel is simply closed. When the two payment parties do not have a direct "channel," they can relay through third-party nodes.

Other off-chain scaling technologies include: CKB, MerlinChain, Statechain, Liquid Network, Rootstock (RSK), OmniLayer, BitLayer

Ethereum Scaling¶

Ethereum On-Chain Scaling¶

Ethereum originally expected to scale through sharding, which distributes the network load across multiple "shard chains." Each shard can independently process transactions and smart contracts, enabling the entire Ethereum network to process more transactions simultaneously. Shard chains are coordinated and managed for consensus by the Beacon Chain. However, communication and data sharing between different shards is a complex problem. Currently, the Ethereum community favors Rollup-centric off-chain scaling solutions. The Beacon Chain provides more DA for Rollup Layer 2s through EIP-4844.

Ethereum Off-Chain Scaling¶

Off-chain scaling improves the Ethereum network's transaction processing capacity by processing transactions and smart contracts outside the main chain. Ethereum off-chain scaling includes: Rollups (including Validium solutions), State Channels, Sidechains, and Plasma chains. They derive different levels of security from Layer 1.

Rollup: Rollups process a large number of transactions off-chain, compress and package the transaction data into a single data block, and submit it to the main chain. Since the transaction data is included in Layer 1, Rollups inherit native Ethereum security to a high degree. What people commonly refer to as Layer 2 mostly refers to Rollup solutions. Rollups are further divided into Optimistic Rollups (Op Rollup) and Zero-Knowledge Rollups (ZK Rollup).

Op Rollup: Assumes transactions are valid by default and runs computation through fraud proofs only when challenged.
ZK Rollup: Runs computation off-chain and submits validity proofs to the chain.

Under the modular blockchain paradigm, Rollups also serve as the execution layer.

L2Beat provides an overview of most Layer 2 solutions on the market.

Validium: Similar to Rollups, but transaction data is stored off-chain, using zero-knowledge proofs to ensure the correctness and security of off-chain data.

State Channels: Use multisig contracts to enable participants to transact quickly and freely off-chain, then finalize on the mainnet. This minimizes network congestion, fees, and latency. There are two types of channels: state channels and payment channels.

Sidechains: Sidechains are independent blockchains that run parallel to and are compatible with the Ethereum Virtual Machine. They are compatible with Ethereum through a two-way bridge and operate according to their own chosen consensus rules and block parameters. The Polygon network is commonly considered an Ethereum sidechain.

Plasma: A separate blockchain anchored to the Ethereum main chain that uses fraud proofs to arbitrate disputes.