Ethereum co-founder, Vitalik Buterin, recently shared his vision for advancing cross-chain interoperability within Ethereum layer-2 (L2) networks.
His comments suggested significant improvements that could enhance the user experience across the Ethereum ecosystem.
Buterin took to X on 6 August to respond to a query about promising solutions for cross-layer-2 interoperability. This response came after an earlier post on 5 August, where he expressed optimism about overcoming the challenges related to cross-layer-2 interactions.
Buterin stated, “I think people will be surprised by how quickly ‘cross-L2 interoperability problems’ stop being problems and we get a smooth user experience across the entire Ethereum-verse”.
He highlighted the considerable effort and enthusiasm from the community to make this a reality.
A crucial element of this progress is Ethereum Improvement Proposal (EIP) 3370. This proposal introduces a new address standard that will enable wallets and decentralised applications to display chain-specific addresses using a human-readable prefix.
According to Buterin, “EIP-3370 is a step towards making interactions between different Ethereum layers more user-friendly and intuitive”.
Another significant proposal is EIP-7683, which aims to establish a standardised method for communication and trade execution between different Ethereum layer-2 networks.
Currently, trading assets between various networks can be complex and inefficient. EIP-7683 seeks to standardise these interactions, potentially easing the process for users.
Buterin remarked, “Creating a common set of rules for all chains to follow will help in addressing the current inefficiencies”.
Furthermore, EIP-3668 outlines a method for Ethereum smart contracts to access off-chain data, which Buterin refers to as “layer-2 light clients”.
This proposal aims to standardise how smart contracts interact with off-chain data, reducing on-chain storage costs and improving efficiency for developers.
Buterin commented, “By standardising off-chain data access, we make it easier for developers to build data-intensive applications without incurring high costs”.
Future developments
Looking ahead, Buterin mentioned several upcoming updates designed to enhance cross-chain compatibility for layer-2 networks.
These include keystore rollups and proof aggregation, which are part of a broader strategy to improve interoperability.
He emphasised that these “stage 1” updates are independent of specific rollup technologies, suggesting that they have broad applicability across different systems.
Buterin also discussed the compatibility of existing rollups with zero-knowledge (zk) and optimistic rollups.
He believes that zk technology will eventually become the standard for rollups finalising transactions to Ethereum.
“Eventually, I think all rollups will go zk (and existing zk rollups will have to redo their tech stack), in order to finalise toEthereum once per slot”, Buterin noted.
However, this transition is expected to take over five years to fully realise.
Market reactions
The cryptocurrency market has experienced much volatility recently.
On 5 August, Ethereum’s ($ETH) price dropped sharply to around $2,100, marking a significant decline from a high of $3,016 on 3 August.
This decrease, which amounted to approximately 30%, was exacerbated by substantial $ETH transfers by Jump Trading and rising geopolitical tensions.
The downturn highlighted the volatile nature of the cryptocurrency market and the interconnected factors influencing its performance.
However, Ethereum’s price rebounded by over 14% in the following 24 hours, trading around $2,514.
This recovery reflects a broader trend of recovery seen in Bitcoin ($BTC) prices, contributing to an overall increase in the total cryptocurrency market capitalisation.
Despite the rebound, concerns persist about further declines. The significant outflows from Ethereum investments, including $430 million withdrawn since the launch of US-based spot Ethereum ETFs on 23 July, have raised alarms.
A 5 August report by CoinShares highlighted that crypto investment funds experienced “outflows for the first time in 4 weeks” during the week ending 3 August.
CoinShares analyst, James Butterfill, attributed these outflows to “fears of a recession in the US, geopolitical concerns, and consequent broader market liquidations across most asset classes”.
The negative sentiment has been largely focused on major cryptocurrencies like Bitcoin and Ethereum.
Data from SoSo Value revealed that spot Ethereum ETFs saw $229.77 million in outflows against $60.42 million in inflows during the week of 29 July to 2 August. This trend underscores the cautious outlook among investors amid global uncertainties.
