As the Ethereum network transitions towards a more modular architecture, teams have started developing L2 blockchains specifically designed for specific use cases or specific performance requirements. Developers will find themselves at a crossroads, having to choose from various modular components for their L2s. In this post, I will explore the different building blocks that teams need to employ to construct a decentralized, modular L2.

Rollup stack

The first step is to choose the right rollup stack. Rollup stacks are essentially collections of software components and layers that, when combined, form the backbone of an L2 blockchain. They come in two main flavors: optimistic rollups and zero-knowledge (ZK) rollups. Optimistic rollups operate on a trust-but-verify model, using fraud proofs to ensure the integrity of transactions. Zero-knowledge rollups, on the other hand, use ZK validity proofs to verify transactions without revealing any sensitive information. This method not only ensures privacy but also maintains a high level of security and integrity.

While choosing a rollup stack is not mandatory, it is highly recommended. These stacks provide a framework that simplifies the building process of L2 blockchains. They offer modular components—such as data availability solutions and sequencing options—that developers can customize based on their project’s needs. This modular approach accelerates development, allowing projects to reach the market more quickly.

Examples of popular rollup stacks include the OP Stack for optimistic rollups, ZK Sync for ZK rollups, and Polygon CDK for ZK rollups using zkEVM. Each of these stacks offers a unique set of tools and components, enabling developers to tailor their L2 solutions effectively.

Sequencer 

A sequencer is responsible for ordering the transactions and it plays a crucial role in maintaining the integrity of the blockchain. The choice between utilizing a centralized sequencer versus a decentralized sequencer introduces a key decision point in L2 development. Centralized sequencers offer superior throughput and enhanced control over Miner Extractable Value (MEV), optimizing performance metrics. However, this centralization potentially compromises the foundational blockchain principle of decentralization. However, a majority of L2s today use centralized sequencers for its efficiency advantages.

Conversely, adopting a decentralized sequencer architecture aligns closely with the decentralization ethos, promoting a trustless environment and enhancing censorship resistance by distributing the sequencing responsibility across a network. This model not only adheres to the blockchain’s decentralized paradigm but also mitigates single points of failure, thereby increasing the network’s resilience. Initiatives like Espresso, Nodekit, Madara are at the forefront of developing decentralized sequencing solutions, showcasing the feasibility of maintaining decentralization without significantly compromising on the efficiency and scalability of L2 blockchains. The decision between centralized and decentralized sequencers thus reflects a deeper choice between prioritizing performance or upholding the decentralization principle at the core of blockchain technology.

Data Availability Network

Data availability plays a critical role in the structure of L2 solutions, ensuring that transaction data for each block is both accessible and verifiable within the blockchain. As a developer, you have two choices: either store transaction data directly on-chain or utilize decentralized data availability networks designed specifically for this purpose. It’s critical to make the transaction data available to ensure the trustlessness of the L2 platform, enabling participants to independently verify transactions without relying on a central authority.

Storing transaction data on-chain, while straightforward, poses significant challenges, primarily due to the high costs associated with variable gas fees and the potential for network congestion. These factors can make on-chain data storage prohibitively expensive and unpredictable, undermining the scalability and efficiency benefits. In response, a growing trend is the adoption of decentralized data availability networks, which offer a specialized infrastructure for storing transaction data off-chain while maintaining its availability for verification. Celestia is a pioneer in this space with modular solutions for data availability. Additionally, emerging projects like EigenDA, AvailDA, and ZeroGravity are in development, aiming to provide L2 platforms with a range of options for off-chain data storage. These solutions promise to enhance the scalability, cost-efficiency, and trustlessness of L2 blockchains by addressing the data availability challenge in a decentralized manner.

Prover / Verifier network

For blockchain networks based on Zero-Knowledge (ZK) protocols, the system architecture depends on a prover to create a ZK-proof. This is a cryptographic demonstration that attests to the validity of transactions without disclosing the underlying data. Verifiers then examine this proof to confirm its correctness, thus ensuring the blockchain’s integrity while safeguarding data privacy. In a modular ecosystem, the significance of prover/verifier networks or marketplaces escalates, as they relieve developers from the burden of building their own ZK functionalities. Developers have access to a variety of platforms / marketplaces such as Gevulot, =nil;, and Marlin for proof generation and verification. These platforms serve as ZK prover/verifier marketplaces, hosting participants who specialize in generating and validating proofs using diverse ZK techniques.

Conversely, Optimistic rollups adopt a different paradigm. Inherently, they do not necessitate a dedicated prover since the system operates under the assumption that transactions are valid by default. However, they optionally incorporate a verifier network as a safeguard mechanism. This network’s primary role is to verify transactions only when fraud is suspected, through the generation of fraud proofs by node operators. This mechanism, coupled with incentive alignment within the network, ensures the security and reliability of Optimistic rollups. 

Settlement Network

The settlement network guarantees the security and finality of transactions, cementing the immutability and reliability of the entire ecosystem. Apart from the technical capabilities, the user adoption and trust are significant factors when evaluating a settlement layer. A blockchain that commands a significant share of user trust and has widespread acceptance is naturally a more attractive option for L2 projects, as it promises a larger user base and greater network effects. Bitcoin and Ethereum stand out as the most popular choices for settlement layers among newly developed L2 solutions. Building L2s on top of the Bitcoin blockchain as the settlement network has gained a significant developer mindshare and it has become a major narrative for this cycle. 

Interoperability Solution

Interoperability across blockchains enables the L2 to communicate and transact across various blockchain networks, including other L2s and the foundational Layer 1 (L1) chains. This cross-chain interaction is critical for bridging assets and information, broadening the operational scope and utility of an L2 blockchain. To achieve such interoperability, developers can integrate their L2 solutions with specialized bridges, such as Axelar and Omni, which are designed to connect disparate blockchains. Alternatively, embracing a foundational, or Layer 0, approach provides a more integrated basis for cross-chain communication. There are several other solutions like Polymer, which leverage Inter-Blockchain Communication (IBC) for efficient cross-chain transactions.

A more recent approach that has emerged is the utilization of multiple VMs that enable the chain to seamlessly communicate with other chains. This approach allows for native compatibility with a variety of blockchains such as Solana Virtual Machine (SVM), Aptos’s MoveVM, and other specialized VMs. When selecting an interoperability solution, it is crucial for developers to weigh three key factors: cost, speed, and security. These considerations ensure that the chosen solution not only facilitates efficient and secure cross-chain interactions but also aligns with the economic and performance objectives of the L2 platform, ensuring a balanced and effective integration strategy.

Alternative Strategy

Rollup as a Service (RaaS) platforms, including AltLayer and Dymension, present an alternative for blockchain projects. These platforms offer a ready-made rollup solution, eliminating the need for projects to develop their own L2 solutions from scratch. This approach significantly reduces development time and complexity, allowing projects to focus on their unique use cases and core functionalities. Many Rollup as a Service (RaaS) platforms are quite new, which makes it unclear how customizable and flexible they are for different blockchain projects. While they aim to make L2 deployment easier, there’s still some uncertainty about how well they can adapt to various needs. This means it’s wise to carefully consider if they’re the right choice for every project.

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