Scalability and a multichain future became the major discussion points in our recent CMC Live episode with NEAR Protocol.
Despite the bear market, blockchain adoption seems to be on a long-term growth trajectory. But blockchains face scalability challenges that create bottlenecks, high fees and constraints on innovation.
This challenge became the key discussion point in one of our recent CMC Live episodes. We dived into the different scaling approaches, analyzed the arguments around a multichain ecosystem, and showcased relevant projects leading the charge.
Missed the episode? We’ve got you covered!
Scaling Solutions: Rollups, Sharding, Layer 2 and 3 Protocols
There are different solutions to tackle the blockchain trilemma. The most important ones include rollups, sharding, layer-2 and layer-3 chains.
Rollups
Rollups aggregate several transactions into one and process them off-chain. The mainnet is relieved from an overload of data, which helps to keep gas fees low.
There are two types of rollups: zero-knowledge rollups (ZK-rollups) and optimistic rollups.
Sharding
Sharding is a scaling solution that splits the blockchain into multiple parallel chains, called shards, that can process transactions simultaneously. This increases the network capacity and speed but also introduces challenges such as cross-shard communication and security. Sharding can improve the scalability of blockchains by distributing the workload and storage among different nodes and shards.
Layer 2s
Layer 2s are a general term for any scaling solution that operates on a separate layer from the main chain, and interacts with it through smart contracts or bridges. Layer 2s can have different consensus mechanisms, architectures and features than the main chain, allowing for more flexibility and innovation.
Layer 3s
Layer 3s are blockchains building on top of L2s. L3s can leverage the scalability and security of layer 2s, while offering more user-friendly and diverse experiences. Some examples of L3s are DeFi protocols, NFT marketplaces and gaming platforms.
The Multichain Future: Boon or Bane?
Supporters argue a multichain future will spur more innovation, customization and collaboration in the blockchain industry. With different chains optimized for various use cases, there will be less congestion, and platforms can play to their strengths.
Moreover, a multichain future will enable more experimentation and exploration in the blockchain space, as different blockchains can try out different features, solutions and paradigms. For example, some blockchains can focus on privacy, some on scalability, while others on governance or sustainability, etc. It will create more opportunities and possibilities for blockchain development and adoption and reflect the diversity and plurality of the blockchain community.
Last but not least, a multichain future will bring more interoperability and compatibility among different blockchains, as they will need to communicate and exchange value with each other. This will create more network effects and synergies for blockchain ecosystems, as well as more convenience and efficiency for blockchain users and developers.
Critics argue that too many chains create complexity and increase attack surfaces for hackers. Bridges between chains are still nascent and can carry security risks. The lack of unified standards also hinders usability and adoption.
There are merits to both views. A balanced path would be gradual experimentation with new chains that solve specific needs, coupled with maturing bridges and standards for interlinking these chains in a secure way. The evolution of layer 2 and 3 protocols that leverage base-layer security also creates room for chain specialization.
Blockchains Building the Multichain Future
Scaling is a crucial and challenging issue for the blockchain space. Some of the most popular blockchains working on scaling include:
Ethereum
Ethereum is the most popular blockchain, supporting many scaling solutions like rollups, sharding and L2s and L3s.
BNB Chain
BNB Chain is a fast EVM-compatible standalone chain. It provides a more accessible, efficient and interoperable blockchain platform for the crypto economy.
NEAR
NEAR is a scalable and developer-friendly blockchain that supports smart contracts and DApps in multiple languages, such as Rust and JavaScript. NEAR uses a sharded proof-of-stake (PoS) consensus mechanism that enables high performance and low fees. It also enables cross-chain interoperability through its Rainbow Bridge that connects it with Ethereum and other blockchains.
CMC Live recently invited NEAR to a session to discuss scaling solutions and the multichain future. They talked about its sharding solution compared to that of Ethereum.
In contrast to Ethereum, which is focused on scaling its base layer, NEAR is splitting its blockchain into different parts. And it isn’t aiming low:
“If there were a billion users you would shard the blockchain [...] that is the main essence of NEAR’s philosophy. How to get there.”
Listen to the CMC Live podcast with NEAR about the multichain future here.
The Road Ahead
Challenges around interoperability, governance and standards remain. But we will probably see consolidation around a few dominant players and many niche solutions in a multichain future. Hybrid models may also develop, with security and finality provided by base chains like Ethereum while most activity runs on L2s and L3s.
Read also: What Are Cross-Chain Bridges?
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