Layer 1 vs Layer 2 Scaling: Rollups, State Channels, and Sidechains

The Blockchain Scalability Trilemma

Proposed by Vitalik Buterin, the Scalability Trilemma states that a decentralized blockchain can typically achieve only two of three core properties simultaneously: Decentralization, Security, and Scalability.

To preserve high decentralization and low hardware requirements for running validator nodes, base blockchains (Layer 1) limit block capacity. To scale throughput to thousands of transactions per second, computations are offloaded to Layer 2 (L2) protocols.

Rollups: The Dominant Layer 2 Architecture

A rollup executes hundreds of transactions off-chain, compresses the transaction data, and posts a succinct cryptographic proof back to the Layer 1 base chain.

• Optimistic Rollups (e.g. Arbitrum, Optimism): Assume transactions are valid by default and use a 7-day fraud proof challenge window to catch invalid state transitions.
• Zero-Knowledge Rollups (e.g. zkSync, Starknet): Compute mathematical validity proofs (SNARKs or STARKs) off-chain that prove mathematical correctness instantly to the L1 contract.