Research Summary
The report discusses the evolution of the layer 2 landscape, focusing on the rise of zero-knowledge rollups (ZKRUs) and the introduction of Stylus, a new smart contract environment for Arbitrum. It highlights the shift of activity from layer 1 to layer 2, the dominance of Arbitrum in layer 2 total value locked (TVL), and the potential of Stylus to expand the developer community and enhance the performance of smart contracts. The report also delves into the benefits of WebAssembly (WASM) and the potential of Stylus to unlock new use cases in high-performance cryptography, gaming, and AI.
Key Takeaways
Layer 2 Landscape Evolution
- Shift from Layer 1 to Layer 2: The report notes a significant migration of activity from layer 1 to layer 2, driven by the need for faster and cheaper transactions. Ethereum’s total value locked (TVL) has decreased from nearly $40B to $20B in the past year, while layer 2 TVL has seen substantial growth, indicating a boom in layer 2 adoption.
- Arbitrum’s Dominance: Despite the technological advantages of ZKRUs, Arbitrum maintains over 50% market share of layer 2 TVL, benefiting from its first-mover advantage and strong ecosystem.
- Emergence of ZKRUs: ZKRUs like zkSync and StarkNet are launching their mainnets and attracting users from other ecosystems. They slightly outpace optimistic rollups (OPRUs) in throughput, indicating their potential to gain more market share.
Introduction of Stylus
- Stylus’ Role: Stylus is a new smart contract environment for Arbitrum that allows developers to write efficient, interoperable programs in languages like Rust, C++, and Solidity. It opens up blockchain to general computation and welcomes developers with different tech stacks.
- Expanding Developer Community: Stylus is expected to significantly expand the number of developers who can build on Arbitrum by supporting languages like Rust and C++, making it easier for developers to build Web3 applications without having to learn a new language like Solidity.
Benefits of WebAssembly (WASM)
- WASM’s Role: Stylus works through the addition of a WebAssembly (WASM) virtual machine that runs alongside the existing Ethereum Virtual Machine. Smart contracts written in languages that compile to WASM can be executed natively at speeds 10x or faster than Solidity, reducing gas costs.
- Custom Precompiles: Stylus also enables custom precompiles support, allowing developers to deploy their own Rust or C++ precompiles with ease. This feature expands the horizons of what can be built on the blockchain.
Widespread Interest in Stylus
- Language Support: While Stylus extends the Arbitrum developer community to include languages like C++ and Rust, it still falls short in embracing popular languages such as JavaScript and Python.
- Performance: WASM significantly enhances execution speed while reducing bundle size. Although Stylus has not yet been deployed on the mainnet, benchmarks from other networks suggest that execution times could be 4–8 times faster, and the compiled size could be reduced by approximately 50%.
Actionable Insights
- Exploring New Use Cases: Stylus opens up new use cases like high-performance cryptography, gaming, and AI that were too gas-intensive on EVM alone. Developers can now move intensive computations on-chain that previously exceeded gas limits, opening up new possibilities.
- Expanding Developer Community: By supporting languages like Rust and C++, Stylus can attract a broader developer community. Developers are no longer constrained to Solidity if other languages better suit their needs and expertise.
- Custom Precompiles: Custom precompiles allow seamlessly migrating preferred cryptography, utilities, and other helper functions on-chain for optimal performance. This feature could be key to attracting a broader developer community while providing user-friendly tools.
