Etherium at Scale

a technical report submitted towards CS4900-Seminar and Technical Writing

B. Tech. —— CSE —— VIII Semester —— Spring —— 2023-24

Rituraj Tripathy
(120ec0969)

Department of Electroncis and Communications Engineering

National Institute of Technology Rourkela
Rourkela – 769008, India
Contents
1 Introduction 1

2 Literature Review 2

3 Proof of Stake 3

4 Optimistic and ZK-Rollups 5

5 Sidechains: Conduits for Scalability and Innovation in Parallel 7

6 Conclusion 8

References 9
 Abstract

Ethereum’s ubiquity has underscored intrinsic scalability bottlenecks,

manifesting as network congestion, diminished transaction throughput, and inflated
gas costs. These constraints impede user engagement and the broader adoption
trajectory. This research delves into the core challenges impeding Ethereum’s
scalability and scrutinizes cutting-edge advancements that are redefining the
network’s architecture. Central to our exploration is Ethereum’s transition to
a Proof-of-Stake (PoS) protocol, pivotal for scaling initiatives. PoS significantly
curtails energy demands and lays the groundwork for subsequent enhancements.
Moreover, the study will dissect layer 2 scaling strategies, focusing on Optimistic
Rollups, which aggregate transactions off-chain to boost throughput, ZK-Rollups,
which leverage cryptographic proofs to enhance scalability and privacy, and
Sidechains, operating parallel to the Ethereum mainnet with unique attributes.
The goal of this analysis is to furnish a comprehensive understanding of how these
technologies synergistically foster a scalable, efficient, and universally accessible
Ethereum ecosystem.

1 Introduction
Ethereum, a decentralized, open-source blockchain platform, is a cornerstone of the Web3
landscape, facilitating the deployment of smart contracts, decentralized applications
(dApps), and the trading of non-fungible tokens (NFTs). Yet, it encounters the classic
blockchain trilemma: achieving decentralization, security, and scalability concurrently.
With its growing ubiquity, Ethereum reveals scalability limitations due to each node
processing every transaction, which curbs throughput and causes network congestion.
This leads to slow transaction verifications and inflated gas fees, detracting from the user
experience and hindering mainstream adoption.
This research dissects the principal scalability challenges that Ethereum faces and
assesses forward-thinking solutions crafted to mitigate these issues. We will delve into
Ethereum’s shift to a Proof-of-Stake (PoS) model, a significant deviation from the
energy-intensive Proof-of-Work (PoW) system, aiming to bolster scalability and reduce
energy use. We will explore Layer 2 (L2) solutions, such as Optimistic Rollups (including
platforms like Arbitrum and Optimism), which consolidate transactions off-chain, and

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ZK-Rollups (including zkSync and StarkNet), which utilize zero-knowledge proofs for
off-chain transaction validation, enhancing both scalability and privacy. Additionally,
we will scrutinize Sidechains—autonomous, Ethereum-compatible blockchains like
Polygon—that provide alternative environments for testing and boost transaction
capacity, thereby alleviating pressure on Ethereum’s primary network. This study aims to
deliver an in-depth exploration of Ethereum’s current scaling strategies and the innovative
methodologies that are defining its trajectory.

2 Literature Review
The pursuit of resolving the blockchain trilemma—a sophisticated balance among
decentralization, security, and scalability—serves as a catalyst for innovation within the
blockchain sector. Del Monte, Pennino, and Pizzonia (2020) introduce a theoretical
framework that reevaluates conventional beliefs surrounding this trilemma. They suggest
an innovative architecture that scales a blockchain’s workload in proportion to the node
count without sacrificing decentralization or security. Although primarily theoretical,
their insights provide a groundwork for subsequent scalability advancements [1].
Hafid et al. (2020) conduct a comprehensive review of blockchain scaling strategies,
analyzing both on-chain enhancements like sharding and off-chain mechanisms such as
Layer 2 scaling protocols. Sharding, which segments the blockchain network, is identified
as a viable method to improve efficiency and transaction throughput. Layer 2 solutions,
which function atop the main blockchain, offer substantial scalability benefits, with
ZK-Rollups standing out for their use of zero-knowledge proofs. In a focused study,
Martı́nez et al. (2023) propose a technique to ensure verifiable transaction sequencing
within ZK-Rollups, which is vital for preventing fraud and maintaining the integrity of
these systems [2].
Additionally, Sidechains emerge as a potent solution for scalability challenges. Gaži
et al. (2019) delve into the fusion of Proof-of-Stake (PoS) consensus mechanisms with
Sidechains, outlining a framework that could yield a more efficient and scalable system
while maintaining linkage to Ethereum’s secure main chain. Their research introduces
innovative concepts such as ”merged-staking” to protect smaller Sidechains and novel
ad-hoc threshold multisignatures (ATMS) for secure cross-chain interactions [3].

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 The literature reviewed illustrates various strategies devised to address Ethereum’s
scalability limitations. While theoretical models provide foundational blueprints for
advancement, practical implementations like sharding, ZK-Rollups, broader Layer 2
protocols, and Sidechains demonstrate substantial potential for significantly improving
Ethereum’s scalability. This progress is crucial for evolving Ethereum into a universally
accessible and highly scalable blockchain platform, paving the way for expanded
real-world applications.

3 Proof of Stake
Ethereum’s transition to a Proof-of-Stake (PoS) model marks a critical pivot away from
the scalability and efficiency issues associated with its original Proof-of-Work (PoW)
system. The fundamental flaw in the PoW approach was the requirement for miners
to engage in energy-intensive computations to validate transactions, leading to network
bottlenecks, reduced processing speeds, and elevated transaction costs (gas fees). The
shift to PoS offers several significant improvements:

• Reduced Energy Consumption: The PoS paradigm substitutes power-intensive

miners with validators, who are responsible for maintaining the network’s integrity
without the need for extensive computational work. This transition significantly
diminishes the overall energy consumption, positioning Ethereum as a more
sustainable and environmentally considerate blockchain.

• Increased Transaction Throughput: By integrating the Beacon Chain, the

PoS model facilitates a higher transaction throughput. This enhancement stems
from the elimination of computationally demanding tasks in the validation process,
allowing for a more efficient handling of transactions per second.

• Foundation for Further Enhancements: PoS not only enhances immediate

network capabilities but also lays the groundwork for subsequent scalability
solutions, such as sharding. This technology is anticipated to further expand
Ethereum’s transactional capacity and operational efficiency.

These advancements are pivotal as they not only address inherent limitations but also
drive Ethereum towards becoming a more scalable and environmentally friendly platform.

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This strategic shift is expected to catalyze further innovations and broader adoption of
Ethereum in the blockchain ecosystem.
Despite the advancements brought by Ethereum’s shift to a Proof-of-Stake (PoS)
model, several challenges persist that could impact the long-term success and scalability
of the network:

• Centralization Concerns: Critics express apprehension that PoS may

inadvertently encourage centralization, as individuals or entities with substantial
ETH holdings could potentially exert greater influence over the network’s consensus
process. This staking mechanism might lead to a disproportionate power dynamic,
favoring wealthier participants.

• Technical Complexity: Transitioning to PoS and integrating additional

scalability enhancements, such as sharding, introduces intricate technical
challenges. These complexities must be adeptly managed to maintain the network’s
reliability and performance. The successful deployment of these technologies is
critical to ensuring the network’s seamless functionality.

• Limited Scalability Gains: While PoS has undeniably enhanced Ethereum’s

efficiency and reduced its environmental impact, the scalability improvements are
still somewhat restrained. The network’s ability to handle a vastly increased volume
of transactions hinges on the effective implementation of further measures, such as
sharding and layer 2 solutions like rollups. These enhancements are essential for
achieving the scalability necessary to support global-scale applications.

Addressing these challenges is crucial for Ethereum as it continues to evolve and seeks
to solidify its position as a leading platform in the decentralized ecosystem. Each issue
requires careful consideration and innovative solutions to ensure that Ethereum can meet
its scalability ambitions without compromising on decentralization or security.
While not a perfect solution, Ethereum’s move to PoS is a significant step forward
toward a more scalable, accessible, and sustainable network.

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 Figure 1: The Beacon chain and the corresponding shards

4 Optimistic and ZK-Rollups

As Ethereum continues to evolve with its transition to Proof-of-Stake (PoS), additional
solutions are imperative to achieve the high-throughput capabilities necessary for
widespread blockchain adoption. Layer 2 (L2) rollups, particularly Optimistic Rollups
and Zero-Knowledge (ZK) Rollups, emerge as pivotal technologies in this context,
enabling transactions that are both faster and more cost-efficient than those on the
Ethereum mainnet.
Optimistic Rollups: Efficient Batch Processing Optimistic Rollups streamline
transaction processing by operating similarly to an optimized assembly line. This
technology groups a multitude of transactions outside the main Ethereum chain, processes
them in a separate environment, and subsequently submits only a compressed snapshot
of the final state to the mainnet. This batch processing significantly alleviates the
computational load on the main chain, leading to quicker transaction times and reduced
gas costs. However, the security model of Optimistic Rollups involves a reliance on ”fraud
proofs.” In this model, if an invalid transaction is detected within a batch, any observer
can challenge its validity by submitting a fraud proof to the mainnet. Should such a
challenge arise, it necessitates reverting the entire rollup batch on the mainnet, which

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may lead to delays and additional complexities in the validation process.
This mechanism ensures a layer of security while optimizing efficiency, yet it also
introduces potential vulnerabilities and delays inherent to the fraud proof process.
Addressing these challenges is essential for Optimistic Rollups to function as a robust
and reliable Layer 2 scaling solution for Ethereum.

Figure 2: Working of Optimisitic rollups

Zero-Knowledge Rollups (ZK-Rollups): High-Speed, Privacy-Preserving

Transactions
ZK-Rollups offer a more advanced approach, prioritizing both speed and privacy. Unlike
Optimistic Rollups, ZK-Rollups leverage cryptographic ”zero-knowledge proofs.” These
proofs mathematically guarantee the validity of transactions without revealing the
underlying transaction details. This significantly minimizes the data submitted to the
mainnet, resulting in even faster transaction processing and lower fees compared to
Optimistic Rollups. However, ZK-Rollups currently present a higher development and
implementation complexity compared to their Optimistic counterparts. Both Optimistic

Figure 3: Working of zk rollups

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and ZK-Rollups provide substantial speed advantages over the Ethereum mainnet.
Transactions processed through rollups can be confirmed within seconds, a considerable
improvement over the minutes or even hours it can take on the mainnet. This expedited
processing fosters a significantly improved user experience for applications built upon
these rollups.
In conclusion, Optimistic Rollups prioritize ease of development and faster deployment,
while ZK-Rollups prioritize ultimate speed and privacy with the trade-off of increased
development complexity. Both solutions play a critical role in scaling Ethereum and
unlocking a future of fast, secure, and cost-effective blockchain interactions.

5 Sidechains: Conduits for Scalability and

Innovation in Parallel
Sidechains offer an alternative approach to scaling Ethereum by operating as independent
blockchains running parallel to the main Ethereum network (often referred to as
”Ethereum mainnet” or ”Layer 1”). They employ mechanisms like two-way bridges to
interact with the mainnet:
Interaction with the Mainnet using two way bridges
These bridges act as gateways, enabling the transfer of assets between the mainnet and
the sidechain. Users can lock their assets on the mainnet and have corresponding assets
minted on the sidechain. Conversely, assets on the sidechain can be burned to unlock the
original assets on the mainnet.
Working of Sidechain

• Independent Consensus: Sidechains typically have their own consensus

mechanisms, independent of Ethereum’s. This allows for experimentation and
optimization for specific purposes. A sidechain might prioritize faster transaction
speeds or the use of specific programming languages that aren’t compatible with
the mainnet. .

• Separate Validation: Transactions are validated and blocks are produced by

nodes within the sidechain network, according to the sidechain’s consensus rules.

• Mainnet Communication: The two-way bridge mechanism allows for

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 communication and asset transfer between the sidechain and the main Ethereum
network.

Figure 4: Working of sidechain

Sidechains represent a flexible scaling solution that can be tailored for specific
applications. For example, a gaming project could deploy its own sidechain to facilitate
high-speed, low-cost transactions necessary for seamless gameplay. While offering
greater speed and flexibility, sidechains generally have reduced security compared to
the Ethereum mainnet. However, they provide a useful means for offloading significant
transaction volume from the mainnet, improving the overall performance of the Ethereum
ecosystem.

6 Conclusion
Ethereum’s evolution into a robust blockchain platform accentuates the essential need
for scalability, addressed by various technologies each with unique trade-offs. The shift
to Proof-of-Stake (PoS) enhances energy efficiency and sets a foundation for future
scalability enhancements. Optimistic Rollups offer ease of use and are suitable for
applications where some delay in transaction finality is acceptable. Zero-Knowledge
(ZK) Rollups provide optimal scalability and privacy, ideal for high-throughput and
confidential transactions but require advanced technical implementation. Sidechains
allow for flexibility and rapid transaction processing at the cost of some security
and decentralization. The choice of a scaling solution depends on specific project

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needs, balancing factors like speed, cost, security, and privacy, with these technologies
collectively driving Ethereum towards supporting a broad spectrum of Web3 applications.

References
[1] Gianmaria Del Monte, Diego Pennino, and Maurizio Pizzonia. Scaling blockchains without giving
up decentralization and security: a solution to the blockchain scalability trilemma. In Proceedings
of the 3rd Workshop on Cryptocurrencies and Blockchains for Distributed Systems (CryBlock ’20),
pages 71–76. Association for Computing Machinery, 2020.

[2] S. Martı́nez, T. Lavaur, J. Lacan, and C. P. C. Chanel. Proven transaction flow control for zk-rollups.
2023 5th Conference on Blockchain Research Applications for Innovative Networks and Services
(BRAINS), pages 1–4, 2023.

[3] Peter Gaži, Aggelos Kiayias, and Dionysios Zindros. Proof-of-stake sidechains. In 2019 IEEE
Symposium on Security and Privacy (SP), pages 139–156. IEEE, 2019.