Lumio: Unpacking L2 Technical Architecture
Today, one of the main challenges with blockchain technology is scalability. The growing demand for blockchain applications has led to increased transaction latency, slowing down the system and making it less efficient, thereby hindering widespread adoption and utility.
There are two distinct approaches to scaling a blockchain ecosystem: Layer-1 (L1) scaling and Layer-2 (L2) scaling. Layer-1 scaling involves creating a new blockchain with enhanced block data, improved consensus algorithms, sharding, or directed acyclic graphs (DAGs). Layer-2 scaling, on the other hand, optimizes the usage of the existing blockchain. Instead of performing all activities on-chain, users can carry out most of their operations off-chain within a Layer-2 protocol.
Layer-2 solutions include channels, sidechains, plasma rollups, and hybrid solutions. The latter two offer low transaction fees, high throughput, and robust security.
In this article, we will explore the challenges associated with blockchain scalability, examine potential solutions, delve into the architecture and key components of Layer-2, including outdated plasma and state channels, and focus on the more promising rollup solutions, providing more details about Lumio.
Blockchain Scalability Challenge
So, to start with, what is blockchain scalability? In the context of blockchain technology, scalability refers to the ability of the network to process transactions quickly. It involves the capacity of a blockchain network to handle an increasing volume of transactions, store data, and add more nodes efficiently and promptly, without compromising core features such as security, decentralization, and consensus.When a network cannot handle the transaction demand or requirements, it leads to slow transaction processing times, high fees, and a poor user experience. These slow transaction times and high fees can hinder the usability and practicality of blockchain networks, especially for applications that require high transaction volumes, such as decentralized finance (DeFi), supply chain management, and others. Therefore, scalability is critical for the future growth of blockchain technology.
Traditional blockchains, such as Bitcoin and Ethereum, face inherent scalability limitations due to their design. These networks typically use consensus mechanisms that require every participant to validate and store all transactions. As the number of nodes and transactions increases, scalability issues become more pronounced. Although this approach ensures decentralization and security, it limits transaction throughput. Consequently, these blockchains often experience congestion, leading to delays in transaction confirmation and higher transaction fees.
Layer-1 and Layer-2 Scaling
There are two main approaches to scaling a blockchain ecosystem: Layer-1 (L1) and Layer-2 (L2) scaling. Layer-1 scaling involves creating a new blockchain with improved block data, enhanced consensus algorithms, sharding, or directed acyclic graphs (DAGs).
Layer-2 scaling, on the other hand, optimizes the use of the existing blockchain. Instead of performing all activities on-chain, users can conduct most operations off-chain within a Layer-2 protocol.
Layer-2 blockchain solutions are essential for addressing the scalability, speed, and efficiency challenges of Layer-1 blockchains. By processing transactions off-chain and leveraging innovative technologies, Layer-2 solutions can significantly enhance performance, reduce load and costs, and improve the user experience of blockchain-based systems without compromising the security and decentralization of the underlying blockchain.
L2 Solutions
State Channels
State Channels are solutions that enable numerous off-chain transactions using smart contracts and a deposited fund, where only two on-chain transaction fees are required on the main network.
State Channel Architecture
Initially, participants lock their funds in a multi-signature smart contract on the main network to establish the initial state. Subsequently, participants can conduct numerous fast and economical transactions off-chain. The final state and balances are conveyed to the main network through smart contracts. The state channel is closed once all participants confirm the final state.
Despite offering high transactions per second and low transaction fees, this solution has drawbacks. These include the time and cost involved in creating a smart contract, the inability to execute EVM (Ethereum Virtual Machine) operations, and the need for participants to monitor the network. Additionally, participants must be predetermined, limiting open participation as external parties cannot join the channel without permission.
However, state channels are highly suitable for payment scenarios, particularly for subscriptions involving regular payments. The inability to execute EVM operations and the restricted open participation prevent it from being a universally applicable solution.
Sidechains
Sidechains are independent blockchains that run alongside the main blockchain, operating with a two-way peg mechanism to facilitate off-chain processing while maintaining security.
They function as separate chains running parallel to the main blockchain, handling transactions in batches. This allows for more efficient transaction processing off the main chain, resulting in faster confirmation times and lower fees. Sidechains are not constrained by the transaction throughput limitations of the main chain, thereby reducing network congestion and enhancing overall scalability.
In contrast to the main chain, sidechains employ different consensus mechanisms and can implement unique rules and functionalities tailored to specific use cases. By diverting certain types of transactions to the sidechain, where transactions can occur faster and at lower costs, overall transaction throughput can be increased.
After transactions are executed on the sidechain, the final state is securely settled on the mainchain through the two-way peg mechanism. This integration ensures that security is maintained while leveraging the efficiency benefits of sidechain operations.
Plasma
Plasma consists of chains known as child chains, which are smaller versions of the Ethereum mainnet. Initially referred to as shadow chains, they later adopted the name child chains.
Plasma Architecture
Imagine the Ethereum main network at the top, with an unlimited number of child chains that can be added beneath it. Furthermore, each child chain can have its own set of child chains. Transactions conducted on these child chains are recorded and then transmitted to the parent chain, eventually reaching the Ethereum mainnet. All transmitted data is assumed to be accurate within the system's structure.
Once data is sent to a parent chain, a 7-day challenge period begins. During this period, if anyone suspects that the data is incorrect or fraudulent, they can submit a fraud-proof to challenge the data. This is why there is a 7-day waiting period for withdrawals in plasma solutions.
Hybrid solutions
Hybrid solutions combine features from various L2 technologies for robust scaling.
And Rollups
Rollups are a technology that bundles transactions, hashes key information, and sends these bundles to the Layer-1 (L1) blockchain for execution using a virtual machine known as the execution layer.
ZK Rollups
ZK Rollups derive their name from zero-knowledge proofs, which enable proving the possession of knowledge without revealing specific details. In ZK Rollups, transactions are initially collected and ordered by an actor called the sequencer, who soft-confirms them by execution within blocks.
Next, a prover uses zero-knowledge technology to mathematically prove the correctness of these transactions through a validity proof. This proof, along with compressed transaction data or state differences, is sent to a verifier contract on the main network for final confirmation. This process ensures that transactions achieve their ultimate confirmation.
Optimistic Rollups
Optimistic Rollups are simpler compared to ZK Rollups in architecture. They are compatible with the Ethereum Virtual Machine (EVM) and are easier to develop on. Similar to ZK Rollups, transactions in Optimistic Rollups are gathered, ordered, and executed by a sequencer in blocks.
However, the distinguishing feature lies in the type of proof used. Optimistic Rollups utilize fraud-proofs. Here, the transaction data is compressed and published to the main network, where it is considered correct unless challenged. There is a 7-day window during which anyone can contest the validity of the data by submitting a fraud-proof. If unchallenged, transactions are finalized after this period.
In summary, while ZK Rollups rely on zero-knowledge proofs for transaction verification, Optimistic Rollups assume validity unless proven otherwise through fraud-proofs, affecting the speed and security of transaction finality on the main network.
Introducing Lumio
And this is where Lumio steps in – a modular L2 project that supports any VM on any chain. It serves as an umbrella framework for future L2 chains with various implementations using different virtual machines (VMs).
Lumio's AltVM abstraction can settle on any L1 blockchain, using any VM as its execution layer, allowing developers to choose their preferred blockchain VM (e.g., EVM, Solana VM, Move VM) and deploy on Lumio without compromising security and performance. Lumio supports parallelized execution by deploying on VMs that facilitate it, introducing an innovative concept to the L2 space.
For more details, please visit https://lumio.io/
Lumio Implementations
Lumio on Optimism (the canary mainnet) is the first Lumio instance to settle on the Ethereum mainnet, built using the OP Stack from the Optimism Collective. This stack powers the Optimism mainnet and will serve as the base for the future Optimism Superchain, a network of interconnected L2s.
Lumio on Optimism (testnet) – a production-grade sandbox with EVM and MoveVM versions, currently settling on Ethereum’s Sepolia testnet and moving to the mainnet. Lumio on Optimism uses a Rust implementation of the OP Stack, including the Magi client by a16z and Reth (Rust Ethereum) by Paradigm, with Move VM for faster and safer execution.
Next Lumio Implementation will settle on Solana, supporting SVM (Solana VM), EVM, Move VM, and other VMs. It will be the first Solana rollup with multiple execution layer choices, allowing developers to integrate their products into the Solana ecosystem while maintaining their preferred VM benefits.
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