A hot topic in crypto circles these days is how to process more transactions on a blockchain, leading many pundits to say it can’t be done in a decentralized fashion. This opinion is a popular one but also belies a superficial understanding of the problem with Ethereum’s scaling solutions in particular—a problem that stems from the financing models driving these solutions.
For those unfamiliar with the debate, Ethereum and Bitcoin have for years struggled with congestion and high fees arising from their failure to keep up with demand on their blockchains. This has in turn created opportunities for projects offering “on-top” solutions as a means to handle that extra demand. The result is a plethora of so-called layer-2, or L2, sidechains—Arbitrium, Optimism, and Polygon among them—that are intended to increase transaction capacity while keeping the chain orderly.
