ABCDE: ETH Rollup Scalability, Solana Tokenomics App

Original Article Title: "ETH Rollup Technology and Solana Tokenomics Application"

Original Source: Laobai, ABCDE

After discussing RWA, let's talk about something noteworthy on ETH and Solana.

Let's Start with ETH

One of the most noteworthy things on ETH is Justin's earlier proposal of Native Rollup, which is an extension of the current Based Rollup, with significantly increased implementation complexity.

First, let's briefly talk about Based Rollup -

This is what Puffer/Taiko is working on. Compared to traditional L2, the sequencing rights are given to L1. The main advantages are twofold: first, L1 can capture more value, and second, all Based Rollups theoretically achieve interoperability.

Initially, I had doubts about the interoperability aspect. However, when I spoke with a team working on a Based Rollup project and asked the Founder about it, it was confirmed that interoperability is indeed achievable. This is because within any 12-second Slot on L1, a specific selected validator is responsible for block production, and all Based Rollup sequencing is handled by that selected validator, allowing these Based Rollups to achieve interoperability.

However, two subsequent issues arise:

1. The current major L2 solutions that hold crucial positions may have no motivation to transition to Based Rollup.

2. If in the future there are dozens or even hundreds of Based Rollups, then the burden on the validator responsible for block production on L1 each time would be significantly increased. Their hardware requirements would undoubtedly need to be much higher than they are now. Also, since validators are randomly selected, it means that the hardware requirements for all Candidates would need to keep up. Otherwise, you wouldn't be able to handle the sequencing of dozens or hundreds of L2 solutions. This would inevitably have a substantial impact on the decentralization of the ETH Validators.

Regarding these two concerns, I welcome everyone to leave me a comment to exchange ideas and discuss.

Let's Talk About Native Rollup

While Based Rollup delegates sequencing rights to L1 validators, Native Rollup delegates the proof system to L1 validators by introducing a precompile to make L1 aware of the state transitions within each block of the Native Rollup (this precompile likely needs to be added in a hard fork upgrade at some point). Initially, the proof system uses Re-execution (where L1 validators run transactions themselves) as the starting solution, with Real-Time Proving (based on Snark proof) as an optimization strategy later on. However, this would require a significant advancement in ZK technology (being able to produce a block proof in a few seconds, which is currently far from reality, probably requiring at least 3-5 more years).

Native has three noteworthy aspects

1. One thing worth mentioning is that you will find that this is actually quite similar to ETH's original scaling solution. Isn't this Rollup? Isn't this sharding?

2. Another point is that you will find ETH and Solana have intersected at a certain point. Solana's two scaling projects, MagicBlock's Ephemeral Rollup and Lollipop's Extended Execution Layer, share some similarities with Native Rollup's concept, giving a sense of sharding

3. The third point, which I am not entirely 100% sure about but I believe/hope is the case, is that Native Rollup and projects like MagicBlock provide a user experience where users do not need to switch networks. This means that on MetaMask/Phantom, you will always stay on ETH/Solana L1, and your assets will not go through the bridging process to move between L2. Native/Ephemeral Rollup acts as an external execution layer to perform computations, settling automatically on L1, thereby avoiding liquidity silos

However, the ideal is always abundant, the reality is harsh. Not to mention the technical challenges and implementation timeline, just the existing Layer 2 benefits territorial issue makes it difficult for people to be optimistic. The development of the crypto world has moved beyond the cypherpunk spirit and tech utopianism, and now resembles different factions

As for the upcoming Prague upgrade next month, there are already numerous online articles interpreting it, so I won't elaborate further here. Hopefully, after this upgrade, EIP-7702 can resolve the chaos caused by various account abstractions in different EIPs and present a chain-level ultimate solution. However, whether end-users and developers will bear the consequences is Another Story

Now, let's talk about Solana

Recently, two notable things about Solana are worth mentioning

One of them is the recently popular SIMD-0228 proposal

The proposal is mainly about changing Sol's current inflation, transitioning from a fixed 15% yearly reduction in issuance to an inflation rate dynamically adjusted based on staking rate

In general, it has the following features

1. MEV (Miner Extractable Value) income enhancement (Solana's MEV income in Q4 2024 was 10 times higher than in Q1, but with Pump.fun cooling down, I am quite curious about the MEV income level in 2025)

2. Implemented Dynamic Increase, with three equilibrium points set at 65%, 50%, and 33% based on the staking ratio

3. The new proposal is not overly detrimental to small and medium validators

4. It can be seen that Solana is also transitioning from "overpaying for security" to "finding the minimum necessary payment"

This proposal ultimately failed because it did not receive the required 66.7% majority vote, but it was close as it received around 61%.

Although the proposal did not pass, there are two interesting points worth mentioning:

1. Anatoly did not seem too discouraged. He believes that "Solana's governance needs to be fast and decisive, and quick governance actions will be key to seeking better solutions." In other words, the failure of SIMD-0228 to pass also reflects the efficiency of Solana's network governance. This proposal, from initiation by Multicoin to community discussion to the end of the vote, took only about a month. "Quick approval/failure," and then on to the next one, which is crucial for the rapid evolution of Solana.

2. Chinese media's interpretation of the inflation rate in this proposal was almost entirely incorrect. The vast majority of Chinese media, including Chinese Twitter, interpreted the inflation part of this proposal as "reducing inflation by 80%," meaning that under the current staking rate of around 65%, inflation would be reduced from around 4.8% to around 0.8%. When I first saw this, I was shocked, and after checking several sources, they all had the same interpretation! How could this be possible without causing validators to revolt! Even if Mev income comes in, with the inflation income instantly reduced by 80%, Validators would be on the verge of a strike... I then checked the original proposal and the interpretation of English-speaking community leaders, and it should actually reduce from 4.8% to around 4% under the current staking rate, rather than directly to 0.8%. I guess the author of an early interpretation article in the Chinese community misread the formula, directly understanding it as reducing to 0.8%, and then all the media outlets and KOLs copied that misconception, leading to a collective misunderstanding...

The second thing to mention is not actually news but something that has been around since 2024, yet I learned about it for the first time while chatting with a founder of an RWA project on Solana. That is the Solana Token Extension, which many may not be aware of, so I will share it here:

Solana Token Extension - A next-generation SPL token standard, meaning a token solution at the Solana chain level, includes features such as privacy transactions (only amount privacy, with both parties unable to hide the transfer), transfer hooks (e.g., requiring KYC, enforcing royalties), non-transferable tokens (similar to SBT), interest-bearing assets, metadata, and so on, totaling 19 features that can be freely combined and used.

This is also why the RWA project adopted Solana as its main blockchain. In addition to high TPS, Solana has chain-level native privacy, KYC, and other token standard solutions that are composable. This is much more flexible than various ERC standalone token standards on the ETH side. For blockchain projects like the next-generation Move chain, it is currently not possible to have such rich native-level usability, making Solana their only choice. This has also strengthened my confidence in Solana. Beyond supporting projects like Pumpfun and Meme, I believe that leveraging Token Extension on Solana can lead to many meaningful projects.

Finally finished talking about ETH and Solana. This weekend, I will write the last post in this series, reflecting on Crypto X AI in 2025.

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