Module 3: How Blockchains and Transactions Work
Other Scaling Approaches
Chapter 9 of 13 · about 5 minutes
9.1 Not everything is a rollup
Mint started noticing that people used "Layer 2" loosely. Some networks called themselves Layer 2s but didn't post data to Ethereum. Some fast blockchains had nothing to do with Ethereum at all. And Bitcoin users talked about something called Lightning.
"How do I keep all of these straight?" Mint asked.
"Ask one question about each," said Hash. "Where does its security come from? Once you know that, you know what you're trusting."
This chapter covers the other main approaches to scaling, using that question as the guide.
9.2 High-throughput Layer 1 blockchains
As Chapter 7 described, some blockchains are designed to be fast at the base layer. They typically use some combination of shorter block times, larger blocks, transactions processed in parallel, more efficient consensus designs, and higher hardware requirements for validators.
Security comes from: their own validator set and consensus mechanism.
Strengths: a single, unified network with fast, cheap transactions and no bridging between layers for everyday use.
Trade-offs: running a validator usually requires more powerful hardware and bandwidth, which can limit how many independent validators participate. Some high-throughput networks have experienced outages during heavy demand.
9.3 Sidechains
A sidechain is a separate blockchain that runs alongside a main chain, connected by a bridge. It often uses the same programming environment, so applications and wallets work similarly. But unlike a rollup, it doesn't rely on the main chain to verify its results.
Security comes from: its own validators. If a majority of them collude or are compromised, the sidechain's state and bridged funds can be at risk, regardless of how secure the main chain is.
Think of the difference between a branch office and a franchise. A rollup is like a branch office: the head office keeps the records and can check the branch's books. A sidechain is like a franchise: it uses the same brand and systems, but runs its own books.
Some networks that call themselves Layer 2s are technically sidechains, or hybrids. That's why the question about security matters more than the label.
9.4 Validiums and other hybrids
Some designs prove their results to Ethereum, like a ZK rollup, but keep their transaction data elsewhere instead of posting it to Ethereum. These are often called validiums, or use external data availability networks. They're cheaper than full rollups because posting data to Ethereum is one of the largest costs.
Security comes from: Ethereum for correctness, but an outside party or network for data availability. If that data becomes unavailable, users might be unable to prove their balances and withdraw, even though nobody can create fake balances.
9.5 Payment channels and Lightning
Bitcoin's main scaling approach is very different. The Lightning Network is a network of payment channels built on top of Bitcoin.
Here's the idea. Mint and a café open a channel by locking some bitcoin into a shared Bitcoin transaction. After that, they can send payments back and forth instantly, as many times as they like, by updating and signing a balance sheet between themselves, without recording each payment on the blockchain. When they're done, they close the channel, and only the final balance is recorded on Bitcoin.
| On-chain Bitcoin | Lightning | |
|---|---|---|
| Recorded on the blockchain | Every transaction | Only opening and closing channels |
| Speed | About 10 minutes per block, longer for more confirmations | Typically seconds |
| Fees | Depend on block space demand | Usually very small |
| Good for | Larger, less frequent transfers and savings | Small, frequent payments |
| Main complexity | Fees during busy periods | Channel management, liquidity, and needing to be online or use a service |
Payments can also route through several channels, so Mint doesn't need a direct channel with everyone. If Mint has a channel with a hub, and the hub has a channel with the café, Mint can pay the café through the hub.
Security comes from: Bitcoin itself, because either party can close a channel on-chain and claim the latest agreed balance. Lightning has its own complexities, and many everyday users rely on custodial Lightning wallets for simplicity, which brings back custodial risk.
9.6 Appchains
An appchain is a blockchain built for one specific application or use case, such as a game, an exchange, or a payment system. It can be designed as a rollup, a sidechain, or an independent blockchain, and tuned for exactly what that application needs.
Security comes from: whichever model it uses.
Strengths: the application doesn't compete with others for block space and can customise fees and features.
Trade-offs: liquidity and users are more isolated, and smaller networks may have weaker security.
9.7 Putting it together
| Approach | Where security mainly comes from | Main trade-off |
|---|---|---|
| Rollup (Chapter 8) | Ethereum, for both data and correctness | Sequencer trust and withdrawal complexity |
| Validium or hybrid | Ethereum for correctness, others for data | Data availability risk |
| Sidechain | Its own validators | Weaker security if validators are compromised |
| High-throughput Layer 1 | Its own validators | Higher validator requirements, possible outages |
| Lightning | Bitcoin, through enforceable channels | Channel and liquidity management |
| Appchain | Depends on its design | Isolation and potentially smaller security budget |
Node summarised it. "So 'fast and cheap' always comes from either trusting a smaller group, or using a clever design that still has some catch."
"That's the honest version," said Hash. "The catch can be perfectly acceptable. Plenty of people happily use sidechains for small amounts and rollups for daily use. The point is knowing which catch you've accepted."
9.8 Try it yourself
Pick three networks that you've heard described as fast or as a Layer 2. For each one, answer the security question: does it post data to Ethereum? Does Ethereum verify its results? Or does it rely on its own validators? Use the network's official documentation and an independent tracker.
If you have a Lightning-compatible wallet, try receiving a very small Lightning payment and compare the speed and fee with an on-chain Bitcoin transaction.
Key takeaways from this chapter
- The key question for any scaling approach is where its security comes from.
- High-throughput Layer 1s are fast and unified but often require more powerful validators.
- Sidechains are separate blockchains with their own validators, connected by bridges, and don't inherit the main chain's security.
- Validiums prove correctness to Ethereum but keep data elsewhere, adding data availability risk.
- Lightning scales Bitcoin through payment channels, recording only openings and closings on-chain.
- Appchains are built for single applications and trade isolation for customisation.
- Fast and cheap always involves a trade-off. Know which one you're accepting.