In the early days of blockchain, when the industry was making waves among the general public, Ethereum grew into a thriving ecosystem. The platform was publicly launched in 2015 and is designed to evolve beyond Bitcoin, focusing on decentralized applications rather than acting as a store of value. Although it is and remains the leader in blockchain ecosystems (Bitcoin may be worth more, but the mass adoption of Ethereum by developers has no equal), gas rates in 2017 became increasingly impractical.
Co-founder Vitalik Buterin saw this as a major obstacle and proposed a scalability solution called Plasma. Since we are not using Plasma or any other version today, it is clear that its rollout was not successful. At least, maybe until now. Let’s take a look at what Plasma is, why its original form never happened, and why new technology could hold the missing piece for Ethereum’s significant scalability.
What is plasma and why is it not enough?
In a nutshell: Plasma is designed to directly address the issues caused by the Ethereum consensus. This process is incredibly effective at preventing invalid transactions, with 11.2K nodes in nearly 3K locations around the world each capturing new blocks and submitting them for verification from the network. The system is the basis for the power of Ethereum, but it is simply not a scalable solution. For transactions, and especially for non-fungible payments, the process can be done outside the mainnet and become much cheaper and faster. Plasma was intended to post only verified statuses, striking a balance between scalability and Ethereum security.
The Plasma Cash iteration, developed in 2018, provides the simplest example of Plasma in action. The system processes payments and processes coins as NFTs to make it easier to track ownership. Using Merkle trees, ownership (and asset transfers) are tracked with each block created. The blocks themselves are created by an operator, who is responsible for regularly publishing blocks to the chain and sending the Merkle root and any branches associated with the users involved.
This system works well, but runs into problems once it is generalized to a wide range of applications. There are several primary problems with the original Plasma model.
First, the operator can “misbehave” by publishing an invalid block, or by publishing an unavailable block. Either way, this creates an error in the chain, requiring affected users to take action. When a user wants to exit, he or she bears the burden of providing the Merkle tree showing that the assets have been transferred to him or her. This will create a seven-day challenge period during which any other user can challenge the exit by showing proof that the ownership is not valid.
Second, the plasma system will become more complicated once it moves away from NFTs and towards fungible tokens. The original idea to solve this was to simply create NFTs for any reasonable denomination of a coin. This would work in terms of tracking ownership, but creates the problem of fragmentation: trying to exit with fragments of tokens located throughout the chain leads to high gas fees. While the “unspent transaction output” (UTXO) model can help resolve the situation for payments to the EVM, going beyond this reduces the usefulness of Plasma because it does not require the issue of “ownership” of an object for many use cases. is.
Cais Manai, the Chief Product Officer at Ten, the Layer 2 rollup that hyperscales and encrypts Ethereum, said: “Plasma chains handle transaction processing off-chain and only send aggregated results to Mainnet. This works well for payments, where the status change is simple, i.e. based on UTXO (debit one account, credit another), and the verification can be done with less data (e.g. Merkle receipts of transactions). Ultimately, you are just keeping track of who owns a particular state, while ensuring that no double spending occurs.”
“It becomes problematic for applications that require more complex data interactions and verifications inherent in general computing and smart contracts. Consider a DEX with a constantly evolving liquidity pool, managed by thousands of users through trades, deposits and withdrawals. It is virtually impossible to reconstruct a valid state without access to the data,” said Cais Manai.
These issues created a promising system, but not one that could remove all barriers. However, 2023 paved the way for the Zk-SNARK technology, presenting a unique opportunity for Ethereum in general and Plasma in particular.
Zk-SNARKs, the missing piece
In November 2023, Buterin provided new thoughts on the Plasma model, updating it with the combination of Zk-SNARKS to address critical shortcomings.
The ‘Neo-Plasma’ model could extend use cases to the EVM without encountering many of the problems. As Buterin states: “They can be used to implement a parallel UTXO graph for ETH and ERC20 tokens, and SNARK proves the equivalence between the UTXO graph and the EVM state. Once you have that, you can implement a ‘regular’ plasma system via the UTXO graph.”
Zk-SNARKS provide the validity needed to overcome the long process of challenging operator errors because it prevents the operator from creating invalid blocks. The result is the elimination of challenges from history, transforming Plasma into an instant recording system and significantly increasing its value.
“Vitalik’s “exit game” mechanism for Plasma is a critical part of ensuring security and trust in the Plasma framework,” said Dr. Nir Haloani, the Chief Technology Officer at privacy-focused Ethereum Layer 2 solution Coti. “While this mechanism is complex and potentially inconvenient in real-world applications, improvements in zero-knowledge proofs, such as ZK-SNARKs, could make neo-Plasma more viable by simplifying the exit process and improving scalability and privacy. This makes the idea of using neo-Plasma to address Ethereum’s scalability and privacy issues more realistic,” added Dr. Halaoni to it.
How will Neo-Plasma Boost Ethereum?
Where even Neo-Plasma falls short is in CDP (collateralized debt position) use cases, as there is still a beneficial owner of the assets in question. However, removing these types of use cases still creates huge opportunities for Ethereum. While rollups outperform the Neo-Plasma model in terms of security, Neo-Plasma avoids the issues validiums face where the underlying data can be unavailable for extended periods of time. Dr. Nir Haloani believes that a hybrid solution combining Rollups and Plasma, leveraging advances in zero-knowledge proofs (ZK-SNARKs), could more effectively address Ethereum’s scalability and privacy issues.
“Rollups have become the gold standard for scalability by compressing transaction data and posting it to the Ethereum mainnet, while Plasma, with its ability to handle transactions off-chain and post only final statuses, provides additional scalability and security improvements offers,” said Dr. Haloni.
Leona Hioki, co-founder of INTMAX, the Ethereum Layer-2 zkRollup that uses stateless architecture, agrees. Hioki added: “The elimination of the online requirement, which was Plasma’s biggest problem, represents an important solution. While Plasma Free is Plasma, it enables the full execution of the Ethereum Virtual Machine (EVM), making it both understandable and useful.”
The biggest advantage of the Neo-Plasma model is the much-needed balance between solid security, full scalability and low transaction costs. Ethereum, with all its growth, must overcome volatile gas prices if it hopes to achieve true mass adoption among a mainstream audience. Furthermore, unpredictable gas rates that can reach a certain level eliminate many different use cases that generate a small profit, but if scaled up can generate real revenue.
These are the use cases that will attract more and more traditional companies ready to expand their product lines by adding Web3 value. Neo-Plasma may well play an important role in this larger ecosystem growth in the coming years.
Disclaimer: The Industry Talk section presents information from cryptocurrency brokers and is not part of the editorial content of Cryptonews.com.