Ethereum’s second-layer solutions lack real-world usability, according to Skale’s CTO

Cointelegraph spoke with Konstantin Kladko, the CTO of Skale Network, a blockchain platform based on Ethereum (ETH).

Kladko holds a PhD in physics from the Max Planck Institute and a master’s degree in computer science from Stanford. Over the course of a long career that includes Los Alamos National Laboratory and Sun Microsystems, he also contributed to the creation of Java.

While Kladko is undoubtedly a fanatic and believer in Ethereum, referring to it as „an unstoppable digger,“ he often goes against popular community narratives, especially with regard to the „layer two“ scale.

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As Cointelegraph reported earlier, in 2019 the Ethereum community moved a long way away from Plasma, a proposed side-chain network that would have removed a large part of the computer load from the main network. A class of two layer solutions called Rollups took its place, with two variants called zk-Rollup and Optimistic Rollup.

The problems with zk-Rollups
The first is based on the concept of zero knowledge tests , which in this case would be used to verify the accuracy of what is happening in the side-chain in an efficient way. The Bitcoin Loophole community has largely distanced itself from zk-Rollups, due to performance issues and the inability to use smart contracts in such chains.

Kladko believes that zero-knowledge technology is simply not good enough to scale yet:

„We looked at zk-STARKs a lot in Skale, and the conclusion we came to was that it’s a promising and fundamental technology, but it’s probably not ready yet in five years, in the sense that it’s slow.“

He said that according to his „back of the napkin“ calculations, making a trade would require waiting „about an hour“. However, Kladko revealed that Skale is using the technology to generate random numbers, where it is quite effective.

For scaling applications, however, he believes they „need to be 100 times faster to be super usable“ in practical environments. That may take some time, since „the lowest fruit of this algorithm“ has already been taken, Kladko said.

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„It’s [a matter of] fundamental science, so we’ll see … But technology is really interesting,“ he concluded.

It should be noted that the recently launched DeversiFi has zk-STARKs for scalability, although the details of its application are not public.

Optimistic Rollups and Forwards
The other Rollup solution radically changes the security assumptions of the second layer. Instead of verifying that all transactions are correct, the system simply assumes that all are valid, and allows users to submit „evidence of fraud“ if the operator misbehaves.

But that only includes stealing money directly, which Kladko called a „borderline case. He explained it to me:

„The reason we looked at this thing and decided to skip it is because of centralization. The only thing the Optimistic Rollups guarantee is that if you steal money directly, people can complain and you’ll get caught. […] But, if you’re doing DeFi, nobody physically steals money. […] What they’re doing is a front runner.“

The front is based on having exclusive information about a trade that is about to be presented and acting on that inner knowledge. For example, a centralized exchange could theoretically get ahead of its users by placing short positions as soon as it sees an influx of new sales orders.

Kladko said this phenomenon already occurs in decentralized exchanges like Uniswap, due to the delay between the filing of a mempool trade and its inclusion in a block, but that knowledge is public.

„The most important thing about optimistic rollups is that the rollup operator, the guy who actually runs the thing, will get these trades first.“

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This is why Kladko believes that rollups are centralized, only the operator will have access to this internal knowledge. That, in his opinion, excludes them from use in decentralised finance, leaving payments as the only possible use.

But that presents a user-friendliness problem, since „people don’t want to watch, and people don’t want to wait,“ he said.