Horizontal Scalability Is the Solution to L2 Fragmentation

The proliferation of Layer 2 projects on Ethereum has compromised the easy exchange of assets and data among them, but there’s one obvious solution.   

Scalability is a big concern facing Web3. Ethereum co-founder Vitalik Buterin endorsed L2s as the scalability solution in 2020 and the L2 space has since snowballed.

However, the increase in competing L2s has led to fragmentation. This means that applications on separate L2s can’t efficiently communicate with the same versions of themselves on a different chain and therefore can’t share liquidity, nor access the same user base. 

The seamless exchange of assets and data across different L2 networks has been compromised, but horizontal scalability represents the solution. 

Achieving a Shared ‘State’

To make horizontal scalability practical, Web3 developers must first overcome certain hurdles. In the current L2 landscape, separate ecosystems are unable to communicate effectively with each other. 

For example, users on one L2 network can only transact within that specific network. To achieve the desired interoperability—the ability for blockchain networks to communicate with each other—there needs to be shared ‘states.’ The ‘state’ refers to all the transactions and operations that have taken place up to a given point in time.

Why is it necessary to share states though? Each L2 rollup is a separate system from Ethereum. This oversight of basic database scaling has led to state fragmentation, inconveniencing users. 

Users want seamless access to assets across multiple blockchains, not just one. Being unable to share states, users are burdened with managing cross-chain asset bridging, multiple wallets, and higher gas fees. And bridging tools have been responsible for $2.8 billion in hacks since 2016, emphasizing the need for change. 

Additionally, the current failure to capitalize on the expanding L2 ecosystem has undermined the potential benefits of network effects. With 48 active L2s and counting, addressing the technical obstacles to shared states is heightened.

A Proven Method for Improving Scalability

When a barista is overwhelmed at work, the boss doesn’t make them work faster; instead, they will hire more people to spread the workload. Similarly, horizontal scalability adds more nodes to a network, distributing the workload. 

By contrast, vertical scalability focuses on enhancing the capabilities of individual nodes, like increasing the Central Processing Unit (CPU) or RAM in computers. Vertical scalability can’t solve L2 fragmentation, however, just as one barista can’t handle peak hours; therefore Web3 developers must focus on horizontal scalability.

Horizontal scalability doesn’t just apply to coffee shops; it’s a proven method across various industries. In the past, companies would purchase on-premise data centers to scale out their infrastructure instead of relying on a single server. Similarly, when scaling out compute power in Artificial Intelligence (AI), models are trained across a farm of Graphics Processing Units (GPUs) rather than on a single GPU.

Amazon Web Services (AWS), the leading provider in cloud computing, deals with millions of active users at any one time and utilizes horizontal scalability to sustain this demand. Specifically, AWS deploys auto-scaling to add or remove computing resources based on demand. 

Applied to L2s, horizontal scalability would involve leveraging the transactions per second (TPS) across multiple L2s, while currently, most L2s only work separately. This would enable applications to dynamically select the L2 with the required TPS to scale their user base and meet user demands effectively.

Similarly to the Internet, blockchains cannot rely on a single server or protocol for all functions. If one part fails, the load can be distributed among the other servers or devices in the system to keep it running smoothly. 

Horizontal scalability, proven by the Internet and cloud computing, offers a logical solution to L2 fragmentation as vertical scalability alone may compromise decentralization and security. 

Implementing Horizontal Scalability

Horizontal scalability can be implemented by breaking down the blockchain into specialized layers, each handling a specific function to increase the network’s transaction throughput. A modular approach, when executed effectively, can achieve both scalability and decentralization without sacrificing security.

By decoupling tasks like execution, settlement, consensus, and data availability, we can add more nodes as needed to meet growing demand. This way, you avoid bottlenecks and make it easier for different blockchains to communicate with each other, reducing the current L2 fragmentation.

Additionally, certain performance limitations such as that seen with Arbitrum’s inscription outage in December, the largest L2 outage to date, will be reduced. During periods of increased activity, surges can be handled efficiently by distributing the workload of the blockchain.

The beauty of this approach is that you can scale incrementally by adding more modules to the network, ensuring a seamless experience as user demand increases.

Scaling efficiently is crucial as more users are onboarded into Web3. It’s essential to shift away from an exclusive focus on any one chain and adopt a pragmatic approach that fosters applications that can operate seamlessly across different chains, thus accommodating the diverse needs of users. Reducing friction and enhancing interoperability will drive the broader adoption of Web3.

Conclusion

Horizontal scalability is the logical antidote to L2 fragmentation as it has been proven to solve scalability issues in traditional industries.

A shift in mindset towards products will also push developers to deliver tangible value to users, opening the door for solutions yet to be discovered. Ultimately, horizontal scalability will help to realize a more interconnected on-chain ecosystem and ensure the continued growth of Ethereum.

Kenny Li is the Co-Founder of p0x Labs and a Core Contributor to Manta Network. Before this, Kenny received an MBA from MIT in 2020. Whilst at MIT, he was a teaching assistant for several courses, mainly blockchain-based, and worked with the Digital Currency Initiative (DCI). As a successful entrepreneur, Kenny has started, advised, and invested in startups for over a decade.