What is Scroll, the New Hotly-Anticipated Layer 2?

Over the past year, it has become clear that Layer 2 solutions will be how Ethereum scales and becomes able to handle thousands of transactions per second at sub-cent fees. Scroll is the latest of these solutions and boasts some of the best zero-knowledge technology currently available. Let’s look at Scroll, how it works, and what it means for the future of Ethereum scalability.

Scroll has been a well-known name in the Ethereum space for the past year. It was founded by Sandy Peng, Shen Haicheng, and Ye Zhang in 2021 and aims to be a scalability solution leveraging the latest zero-knowledge-proof technology. Unlike optimistic rollups like Optimism and Arbitrum, which leverage fraud proofs to ensure their transactions are valid through a 7-day dispute window, zero-knowledge proofs utilize the latest cryptographic technology to mathematically prove every transaction upon posting to the main Ethereum chain. An off-chain computation engine handles transaction execution, creates a zero-knowledge proof, and posts it to the main Ethereum network for validation and storage. If anyone suspects foul play, they can succinctly verify transaction execution by analyzing the zero-knowledge proof, which reveals the authenticity of the transactions and their subsequent state transitions without requiring re-execution.

Scroll was partly funded by a grant from the Ethereum Foundation, meaning it has the backing and support of one of the biggest names in the blockchain industry. Additionally, unlike other rollups, it is both ZK-enabled and heavily compatible with the Ethereum Virtual Machine, or EVM, meaning that deploying smart contracts on Scroll is nearly identical to those on mainnet Ethereum, something that cannot be said for most Layer 2s. For this reason, many experts are anticipating Scroll to quickly develop into one of the top layer 2s based on several metrics, including deployed smart contracts and total value locked. Uniswap was one of the first protocols to commit support to Scroll. After deploying a testnet and seeing over two million transactions, it is a no-brainer for the largest Ethereum-aligned decentralized exchange to begin capturing market share on Scroll.

Even though Scroll has excellent technology and the support of several protocols, top venture capital firms, and blockchain foundations, its success is not guaranteed. The layer 2 space is one of the most competitive markets in crypto, and protocols like Optimism and Arbitrum already hold the majority of market share and have billions of dollars in total value locked. Even though Scroll’s technology could be considered better since it’s based on zero knowledge, competitors like ZkSync, Starknet, and Aztec also use this technology to scale Ethereum cheaply and efficiently. Capturing a significant portion of market share will require strong business development, sufficient auditing, and good enough technology to convince users to migrate from their current favorite layer 2.

Like many recent projects, Scroll has been anticipated to launch a token via airdrop, much like Arbitrum or Optimism. Consequently, many Twitter analysts have been encouraging users to engage with the Scroll testnets, which have no economic value and are primarily in place to find bugs and allow developers to have a testing environment for their eventual mainnet deployments. If the rumors are true and Scroll releases a token, it will more likely than not be airdropped to mainnet users, with a preference towards those early and often. Testnet users will likely be excluded from rewards since they provided no real value besides general debugging.

Though Scroll’s success is far from guaranteed, it has the support and technology to be a popular and compelling layer 2 solution. With backing from the Ethereum foundation, millions of testnet transactions vying for airdrop eligibility, and protocols already planning to deploy, significant value and liquidity should catalyze Scroll to relevancy relatively quickly. 

By Lincoln Murr

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