Why does Ethereum Layer 1 still need to scale when there is a Layer 2 solution?

As Ethereum moves towards a future focused on layer 2 (L2) solutions, Vitalik Buterin, founder of Ethereum, made a remarkable point: Scaling layer 1 (L1) still plays an important role and brings many practical benefits.

Why increase the gas limit above L1?

First of all, it should be understood that the gas limit is the maximum limit on the amount of gas that can be used in a block on Ethereum.

Gas is the unit of measurement of computational resources needed to execute smart transactions and contracts on the network. Higher gas limits mean the network can process more transactions per block, thereby increasing scalability.

Recently, the layer 1 gas limit was increased from 30 million to 36 million, which equates to a 20 percent increase in capacity. Many are in favor of continuing to increase this limit, especially as Ethereum is improving technologically with:

• Enhanced Ethereum client efficiency: Ethereum clients (such as Geth, Nethermind, Besu) are being optimized to work more efficiently, thus being able to process more transactions with the same amount of resources.
• Reduce the need to store transaction history:EIP-4444 is a proposal to reduce the storage burden on network nodes by requiring them to store only transaction history for a certain period of time (e.g., 1 year). This reduces the amount of storage required and improves network performance.
• Stateless Clients: In the future, Ethereum is expected to move to using stateless clients. This type of client does not need to store the entire state of the blockchain, which significantly reduces hardware resource requirements and allows more people to participate in the operation of network nodes.

However, the increase in the layer 1 gas limit also raises some concerns. One of the main concerns is centralization. Increasing gas limits requires network nodes to have more powerful hardware to handle larger blocks. This could result in only large organizations with abundant resources being able to operate network nodes, reducing Ethereum's decentralization.

So why is Vitalik Buterin still in favor of increasing the layer 1 gas cap, even as Ethereum is aiming for a layer 2 focused future?

Benefits of Scaling Layer 1

According to Vitalik, even if most applications and users move to layer 2, scaling layer 1 still brings the following important benefits:

Censorship resistance

One of the core values of blockchain is its resistance to censorship. Anyone can submit a transaction and expect it to be brought up the chain quickly and transparently, as long as they pay the appropriate fee.

Ethereum's Layer 1 has a highly distributed set of stakers, making it extremely difficult to censor transactions. In contrast, layer 2 solutions typically rely on a smaller group of block producers or a centralized, more easily censored sequence.

Some layers 2 have a “force-inclusion” mechanism, which allows users to submit transactions directly to layer 1 if their transactions are censored on layer 2. However, this mechanism is only effective when layer 1 transaction fees are low enough and layer 1 has enough space to handle these “overshoot” transactions, even if layer 2 censors a lot of users.

Vitalik estimates that to ensure effective anti-censorship, layer 1 needs to be scaled up about 4.5 times compared to the current one.

Transfer assets between layers 2

Transferring assets between layers 2 is a common demand of users. For assets with large trading volumes, intent protocols such as ERC-7683 can help optimize this process. However, for low-volume assets or NFTs, users still need to submit transactions through layer 1.

Currently, withdrawing money from layer 2 costs about 250,000 layer 1 gas and depositing money into layer 2 costs about 120,000 layer 1 gas. Vitalik said that with the optimal design, this cost could be reduced to only about 7,500 gases. To achieve this, layer 1 needs to be scaled about 5.5 times.

Moreover, if Ethereum wants to serve the entire world (e.g. 3.1 billion Facebook users) with the need to transfer assets between layers 2, layer 1 needs to be scaled up about 6 times.

Mass escape from layer 2

One of the important advantages of layer 2 over other layer 1 blockchains is the ability to “escape” to layer 1 if layer 2 crashes.

In the event that a layer 2 experiences serious problems (e.g. technical failure, network attack, malicious administration change), users need to be able to withdraw their assets to layer 1 safely within a certain period of time.

Vitalik analyzes that to ensure mass exit from layer 2 safely and efficiently, layer 1 needs to be scaled significantly, especially when users want to withdraw all assets at once.

Release ERC20 on layer 1

Many projects now choose to issue tokens on layer 2 because of the lower cost. However, this carries potential security risks. If layer 2 crashes or is hacked, ERC20 tokens on that layer 2 can be issued indefinitely, affecting the entire Ethereum ecosystem.

Issuing tokens on layer 1 minimizes this risk. However, to encourage the release of ERC20 on layer 1, costs need to be lower. Vitalik estimates that to achieve this goal, layer 1 needs to be scaled up about 18 times.

Keystore wallet operation

Keystore Wallet is a solution that allows users to manage assets across multiple layers 2 with a single layer 1 address. This type of wallet has flexible verification logic, which can be changed (e.g., key change, signature algorithm) and automatically updates across all 2 layers. This verification logic is stored on layer 1.

Scaling layer 1 will help reduce the cost of Keystore wallet operations, making them more accessible to users.

Submit layer 2 evidence

To ensure interoperability between layers 2 in a fast, secure, and decentralized manner, layers 2 need to regularly submit evidence of their status to layer 1.

The cost of submitting this evidence is currently quite high. Scaling layer 1 will help reduce this cost, encourage layers 2 to submit evidence more often, and improve interoperability between them.

In summary, Vitalik Buterin believes that the expansion of layer 1 is an important factor to ensure the sustainable development of Ethereum in the long term, even as layer 2 solutions are becoming increasingly popular.