Taiko: A New Breed of Rollup for Ethereum Scaling

Vitalik Buterin, the founder of Ethereum, recently highlighted Taiko as a prime example of a ‘rollup-based’ solution. This type of Layer 2 (L2) scaling solution is a newer approach, but what exactly does it entail?

Rollups, as a general concept, are L2s that process Ethereum transactions off-chain before sending the data back to the Ethereum mainnet (aka L1) for security. This ensures that transactions are secure. Now, ‘rollup-based’ takes this a step further. The defining characteristic of rollup-based solutions like Taiko is that they utilize Ethereum’s L1 for transaction ordering.

In simpler terms, the order of transactions on a rollup-based system is determined by Ethereum validators instead of a separate sequencer. By leveraging Ethereum for ordering, Taiko aims to be more decentralized compared to rollups that rely on centralized sequencers, which is the case with most L2s today.

This L1-based ordering enables rollup-based systems to batch and confirm transactions more efficiently, potentially leading to lower operational and transaction costs.  Additionally, it eliminates the need for complex elements like separate consensus mechanisms and signature verification sequencers on the L2, simplifying the overall architecture.

In essence, Taiko represents an intriguing new development in Ethereum’s scaling landscape.

If you’re interested in exploring Taiko, here’s a good starting point:

First, you’ll need to bridge ETH to Taiko. ‘Fast bridges’ like Relay or Jumper can facilitate swift transfers. You can also use these bridges to quickly transfer ETH back from Taiko when needed.

Next, Taiko Labs is currently overseeing their Trailblazers Season 2 initiative, which runs from now until December 16, 2024. This season will reward L2 users with 5 million TAIKO tokens for engaging in transactions, featuring a revamped experience points system, new team opportunities, fresh badges, revised XP multipliers, and a new combat game called Faction Battle Arena.

The best way to delve into the Trailblazers 2 campaign is by experimenting with top Taiko applications. Here are a few the Taiko team currently emphasizes:

• Oku - A bridging and swapping platform for Ethereum Virtual Machine (EVM) chains

• Ritsu - A decentralized exchange (DEX) on Taiko

• iZUMi Finance - A multi-chain DeFi protocol that acts as a DEX-as-a-service platform

• Meridian - A stablecoin, perpetual contract trading, and lending protocol

Currently, Taiko ranks as the 19th largest L2 according to L2BEAT data. Despite its current position, the network has significant growth potential, driven not only by its innovative and secure architecture but also by the increasing demand within the Ethereum community for genuinely decentralized rollups.

The concept of ‘rollup-based’ is relatively new in the cryptocurrency space. It may take some time for people to fully grasp why networks like Taiko are so compelling. This knowledge gap regarding the underlying mechanisms of rollup-based systems represents a potential arbitrage opportunity for those willing to dive in.