Ethereum's Based Rollups Are Gaining Momentum, Aiming to Unify Fragmented L2 Space

As ETH market dominance hits new multi-year lows, Ethereum community members are looking to based rollups to help address issues of liquidity and user fragmentation across Ethereum Layer 2 (L2) blockchains.

In an X post earlier this month about upcoming Ethereum developments, the blockchain’s co-founder, Vitalik Buterin, mentioned based rollups, noting that they are already “making rapid progress.”

Rollups are a kind of Ethereum L2 scaling solution. “Based” or “L1-sequenced” rollups are a subset of these scaling solutions, first introduced by Ethereum researcher Justin Drake in March 2023. They were created to address fragmentation issues with rollups, letting Ethereum mainnet’s own validators, not third-party sequencers, decide the order of transactions.

Nicolai Søndergaard, a research analyst at onchain analytics firm Nansen, told The Defiant that the way based rollups work “cuts down on censorship risks and allows different rollups to interact more easily in the same block — a big upgrade over today’s fragmented L2 ecosystem.”

With growing attention from both developers and the Ethereum community, a handful of projects are already putting the based rollup model into action. We took a look at some of the key players and how they’re approaching the challenge of fixing L2 fragmentation.

Taiko Alethia

Much of the attention in the Ethereum community is on Taiko Labs, the developer of general-purpose Ethereum based rollup, Taiko Alethia. Yesterday, April 21, Taiko posted a Q1 update, which highlighted the launch of several community programs and the first based rollup summit, which occured last month. The event featured Buterin as a speaker and was hosted by Taiko.

As for future plans, the project said on the post that it was focused on enabling based preconfirmations, as well as on its decentralized autonomous organization (DAO). In addition, Taiko Labs said its focusing on the launch of another product, Gwyneth, a rollup that enables direct interactions between L2s and Ethereum’s L2.

“We’re the first and only based rollup on mainnet,” Joaquin Mendes Izard, COO of Taiko Labs, told The Defiant in an interview. “Our codebase and tools are shared with Ethereum,” Izard said, calling it “frictionless and future-proof” for devs.

The team admits it traded off UX for decentralization, with Izard adding: “Our UX has lagged behind... but that changes soon.” With based preconfirmations coming to mainnet, transactions on Taiko will get near-instant status updates before final confirmation, he explained. That could massively cut down confirmation times, especially for trading and gaming dApps.

On the adoption front, “DeFi (Curve, Avalon, Takotako, Unagi) and gaming (Brigade Multiverse, Crack and Stack) have led the way,” said Izard. He expects a jump in dApp growth once the improved UX kicks in.

Zooming out, Izard commented on the bigger picture for Ethereum rollups: “Most rollups haven’t really helped Ethereum… they fragment the ecosystem, extract fees, and aren’t aligned.” He sees based and native rollups as the only models that give value back to Ethereum while sticking to its core ethos.

Puffer’s UniFi

UniFi is another based rollup making progress in Ethereum’s scaling ecosystem, developed by Puffer Finance. Per the project’s litepaper, UniFi also lets users earn “native yield” by staking Puffer’s Liquid Restaking Token, pufETH. Puffer’s docs also highlight transaction speed (100ms pre-confirmations) and fast withdrawals to Ethereum’s mainnet among its key features.

UniFi’s testnet launched in November. Puffer’s website states that UniFi’s mainnet launch is slated for “late Q1,” though at the time of writing, it has yet to launch.

Puffer’s UniFi also employs what it calls an appchain economic model, which lets developers build decentralized applications (dApps) on dedicated appchains which they can then “fully monetize.”

Puffer has not responded to The Defiant’s request for comments on its ecosystem development by press time.

RISE

One of the newer emerging players in the Ethereum based rollup world is RISE. Earlier this month, on April 10, the project announced the launch of its testnet, with a clear focus on speed. The project’s official website claims that the chain’s architecture “enables 10ms latency.”

The project says it achieves the “fastest blockchain” title thanks to a technology it calls “Shreds” technology. Shreds enable faster onchain processing by dividing L2 blocks into smaller units, the team stated on X.

In comments to The Defiant, RISE’s founder and CEO, Sam Battenally, outlined the core idea behind Shreds, which is to ditch the inherited block-based structure that most Layer 2s still use. “They [Shreds] generate transaction preconfirmations within single-digit milliseconds, reacting to demand in real time,” he said.

The RISE testnet has already attracted builders, Battenally noted. He told The Defiant that four central limit order books (CLOBs) are building on RISE, given its promises to achieve leading end-to-end latency, critical for high-frequency, onchain trading.

RISE is also looking into less-developed areas like onchain options and more complex financial products, though it’s still early and depends on how the ecosystem grows, Battenally noted.

Meanwhile, in other scaling-related Ethereum ecosystem news, the second largest blockchain’s cofounder recently proposed the idea of replacing the Ethereum Virtual Machine (EVM) with something called RISC-V, an open-source computer program architecture. Buterin argued RISC-V would improve Ethereum’s execution layer’s efficiency, “resolving one of the primary scaling bottlenecks”

ETH’s continued struggle

Today, in the wake of a broader market boost in sentiment, the price of ETH reached above the $1,700 mark for the first time since early April and is currently trading at $1,702. The asset is up a strong 8% on the day and about 5.5% on the week.

However, longer-term price data for ETH is more bleak. Per data from CoinGecko, the largest altcoin is down over 14% on the month and down over 46% on the year, trading at about the same level it was at in September 2023, 65% lower than its all-time high of $4,878.26.

For comparison, BTC is up 37.4% on the year, per CoinGecko data.