This week in The Context, while BTC holders celebrate a low-key (but disputed) record high, đ we look at three big layer-2 developments that emerged during ETHDenver: Abritrum plays Little John to RobinhoodâsâŠRobin Hood; Starkware launches an impossible-to-pronounce prover; and degens mainline Blastâs mainnet.
[Arbitrum Swaps Meet Robinhood đ]
Trading app Robinhood announced that its wallet will soon feature swaps from L2 Arbitrum.
What Journalists Said đ§âđ»:
Arbitrum is the biggest Ethereum layer-2, a type of blockchain that sits atop Ethereum but âprocesses transactions cheaper and faster,â explained Margaux Nijkerk (CoinDesk). This trading functionality could help it extend its lead, as evidenced by ARBâs big price bump.
While L2s may seem intimidating, Robinhood Wallet isnât merely for degens, suggested Vivian Nguyen (Crypto Briefing) â itâs also for newbies. âIt supports multiple networks like Bitcoin and Dogecoin, and offers both user-friendly interfaces for beginners and advanced tools for experienced users.â
Crypto is increasingly becoming a âkey part of [Robinhoodâs] strategy,â wrote Aleks Gilbert (DLNews). Last year, it released the self-custody wallet, which does not collect transaction fees. But âusers still have to pay gas â the transaction fees of the various blockchains the wallet supports.â This move will lower those.
Why It Matters âïž:
Layer-two networks are essential to solving Ethereumâs scaling conundrum but a bit mysterious to casual retail investors. Robinhoodâs mission, meanwhile, is to âdemocratize finance.â Adding Arbitrum swaps to lower fees is precisely the sort of thing that can aid in that mission.
[Starkware Proves It đ§Ÿ]
Cypto software company Starkware announced it is working on a new open-source zero-knowledge prover, Stwo. đ§
What Journalists Said đ§âđ»:
What is this thing? Well, explained James Hunt (The Block), provers âcan confirm transactions are valid without needing to share all the details on the main blockchain.â That means activity can be moved from the congested Ethereum blockchain onto a layer 2 like Starknet to increase efficiency.
The point here is that Stwo is supposed to be faster at generating proofs, said Zoltan Vardai (Cointelegraph). â© That âwill reduce StarkWareâs processing costs, ultimately resulting in lower user fees,â if all goes to plan.
This isnât the first Starkware prover, wrote Bessie Liu (Blockworks). âCurrently, the public Starknet blockchain and Starknet app chains use its first-generation prover called Stone.â đż
PR Perspective đ:
Starkware-created blockchain Starknet just airdropped tokens a few weeks ago â but got dragged by the community and media for alleged inequities in the distribution. It now places 5th in market share. But as weâll see from the next story, competition in the scaling space is fierce, meaning rollups and other L2s must constantly innovateâand get favorable press for doing so â to unseat current leaders Arbitrum and Optimism.
[Will Blast Last? đ]
Ethereum layer-2 Blast launched its mainnet. đ
What Journalists Saidđ§âđ»:
Blastâs appeal is simple. Itâs âan optimistic rollup that gives users a native yield on their Ether and stablecoins.â But thereâs a catch, said Ryan Celaj (DLNews): Until this month, âonce users deposited tokens, they had no way of withdrawing.â
That didnât look great, wrote Oliver Knight (CoinDesk). The project âinitially polarized crypto investors,â some of whom called it a âpyramid scheme due to its controversial one-way bridge.â đș
Indeed, over $2.3 billion was sitting on the network before the mainnet launch, explained Andrew Hayward (Decrypt). While some deposited money hoping to get rewarded with airdrops and rewards from projects built on Blast, âothers are withdrawing their funds into a crypto market thatâs seen sizable gains.â
Why It Matters âïž :
In just five months, Blast has become the third-biggest L2 â even while remaining very much âin development.â Its appeal is obvious, but the optics have been bad from the jump. đŠ The mainnet launch may reassure users and skeptics alike that the rewards will be real. But Blastâs challenge is to now keep users and funds on their platform.
[Tweet Of The Week]
Credit: @MikeIppolito_
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
This week: ââRollupsâ by Delon Chan.
To address network congestion and high fees, Ethereum relies on Layer 2 scaling solutions. Two significant approaches are Optimistic Rollups and ZK-Rollups:
Optimistic Rollups: Solutions like Arbitrum and Optimism increase speed and reduce costs by processing transactions off Ethereum's main chain (Layer 1). They assume transactions are valid by default, only publishing proofs if a dispute arises. This "optimistic" approach offers faster processing while still inheriting security from Ethereum.
ZK-Rollups: These solutions use cryptographic proofs called zero-knowledge proofs to validate transactions off-chain. They provide even greater scalability potential, near-instant finality, and advanced privacy features. ZK-Rollups are becoming increasingly versatile, now supporting a wider range of applications.
While there has been debate about the long-term dominance of one solution over the other, both Optimistic and ZK-Rollups play vital roles in Ethereum's scaling.
The usual disclaimer:Â This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
The team: Founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Ewan Brewster, Andrew Wickerson, Tiffany Mac Sherry, Liam Quinn, Becky Corbel and Delon Chan. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and brands through impactful storytelling. Find out more about us here.