Regardless of sure limitations and potential dangers, the concept of utilizing Ethereum (ETH) as a layer-2 for the Solana (SOL) blockchain will not be as farfetched as it could appear, in keeping with Anatoly Yakovenko, the co-founder of Solana Labs.
In a sequence of tweets on Sunday, Yakovenko took a better have a look at how such an integration might take form, suggesting that the technical collaboration, is “most likely extra seemingly than you would possibly suppose at first look.”
Layer-2 options purpose to handle scalability points confronted by blockchains like Ethereum, which have skilled congestion and excessive transaction charges during times of elevated exercise. Solana, recognized for its excessive throughput and low transaction prices, guarantees a blockchain platform able to effectively accommodating varied decentralized finance (DeFi) functions.
Mentioning that these scaling options “are bridge protocols that present one-way safety,” Yakovenko argues that Ethereum being a layer-2 for Solana would imply that holders of SOL property on the Ethereum blockchain would have “finality ensures” of with the ability to safely exit again to Solana even in instances of transaction double spends or an invalid state transition.
Making this setup work would first require submitting all of the Ethereum transactions into Solana, in keeping with Yakovenko, in addition to submitting a Simplified Fee Verification (SPV) root for the ensuing state—one thing that may function proof that consensus has been reached amongst Ethereum validators relating to the state of the community.
Lastly, to establish and tackle doable faults inside a bridge protocol, a bridge timeout mechanism shall be mandatory. Some examples of faults, per Yakovenko, embrace conflicting SPVs for the basis, invalid root computation, and censorship.
Limitations and dangers of Solana’s ETH-based L2
The Solana Labs co-founder additionally highlighted the restrictions and potential dangers related to this integration, saying that whereas it might be secure to carry SOL property on the Ethereum blockchain, it is not going to be secure “to lend them or preserve positions towards them.”
One key threat is the opportunity of an Ethereum fault or a contentious social consensus fork inside the Ethereum community. In such a situation, the representations of Solana property held on Ethereum might turn into separated from the consensus fork, leading to a scenario the place these property turn into successfully nugatory.
Lending Solana-based USDC, the dollar-pegged stablecoin from Circle, on Ethereum might result in a scenario the place the borrower can withdraw the true USDC on the Solana community, whereas the lender on Ethereum receives a “junk token.”
This situation, argues Yakovenko, is much like the expertise of holding USDC on Ethereum’s Proof-of-Work (EthPow) chain, the place sure tokens could lose worth or performance as a result of community points or modifications.
Moreover, the mixing of Solana property on Ethereum could have implications for varied DeFi protocols. Whereas central restrict order books (CLOBs) would seemingly stay useful, automated market makers (AMMs), and non-flash mortgage borrowing and lending protocols might face limitations or challenges, doubtlessly resulting in inefficiencies or constraints in liquidity provision and buying and selling.
Yakovenko’s proposal got here sizzling on the heels of Ethereum co-founder Vitalik Buterin lamenting about how U.S. regulators are focusing on varied crypto initiatives, together with Solana, which the U.S. Securities and Change Fee in its current lawsuit towards Binance labeled as unregistered securities.
“They don’t deserve it, and if Ethereum finally ends up ‘successful’ via all different blockchains getting kicked off exchanges, that’s not an honorable option to win, and in the long run most likely isn’t even a victory,” Buterin tweeted final week.
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