In the previous post, we were talking about the importance of ETH not just in the crypto sector, but when compared to much more known companies like Bank of America. We also discussed Vitalik Buterin, its co-founder.
What does Vitalik say in his new post?
https://vitalik.ca/general/2023/06/20/deeperdive.html
What Vitalik explains there, in broad strokes, is the holy grail of blockchain technology, that is, how to achieve scalability and security. Until now, ETH has only had one limitation, too much success, which has made the cost of transactions on its network too expensive for the decentralized applications that run on it.
If you don’t want to delve into the more technical part of the post, I’ll explain it very simply. Developers are creating new Rollups. A rollup is a scaling solution for blockchains that allows the number of transactions that can be processed by the network to increase without the need to increase the block size or reduce the time between blocks.
That is, do the same but reducing the transaction cost. And if you look closely at this summary table, the solution proposed by Polygon zkEVM will reduce the current transaction cost from $0.68 to $0.03, that is, 22 times less. This, for decentralized applications, can be the difference between having a profitable project or not, between having thousands of users to having millions, between applying one business model or another. It’s like when we went from paying for each message we sent using SMS to having Whatsapp or Telegram. By virtually eliminating the transaction cost of the infrastructure, it multiplied the number of messages sent and sparked practical uses and applications. We are there.
Observe how the cost of a swap (changing one crypto for another) will be reduced. It would go from a painful $3.42 to a measly $0.1. That’s a 342 times reduction! Can you imagine if your bank applied this fee to change dollars to euros? How many years of innovation and progress has traditional banking taken to see a revolution like this in exchange rates? Traditional finance has nothing to do against DEFI, basically because the pace of innovation of these is infinitely superior. They can only adapt or die. Hence the movements of the past week with Blackrock that has moved the market positively.
Well, this is the new crypto scenario. This is happening now, even though it doesn’t appear in any national newspaper.
I do not go into the valuation of Loopring although it is first in the Rollups ranking because its solution does not have the same level of security as Polygon, and the point, I believe, is to achieve scalability without sacrificing security.
Interoperability
In any case, as Vitalik writes, we must pay close attention to those who are offering solutions that can interact seamlessly between L1 and various L2 solutions. This is important to ensure smooth and secure integration between different layers and scalability solutions. It will also be important to facilitate the reading of data between different layers. For example, a smart contract on L2 may need to read data from L1, or vice versa, or even from another L2 contract.
It will also be important to separate asset management (such as cryptocurrencies) from key management (the private keys that prove ownership of those assets). This separation could improve security and scalability.
One solution would be to have a keystore, a place to securely store our keys so that the different wallets we have on different blockchains on layer L1, L2, or L3, or in different decentralized applications, could operate securely among themselves.
History is written in lines of code.
Archaeologists and historians use manuscripts, papyrus, and books to know what happened. Just as the Rosetta Stone was a great milestone in history being the key to deciphering the meaning of Egyptian hieroglyphs, in a few years, some historian will realize that history is now also being written in code.
Technology is one of the keys to understanding history. It’s much more important than what history books usually explain. You cannot understand the expansion of the Roman Empire without understanding their technological advances in building aqueducts or roads.
Yours in crypto and AI