#25 - Caldera: The Case for Dedicated Rollups

Solving the Noisy Neighbor Problem for Blockchain Applications

Sep 18, 2023

Stanford Blockchain Review
Volume 3, Article No. 5

📚Author: Matt Katz – Caldera
🌟Technical Prerequisite: Low/Moderate

The Noisy Neighbor Problem

If you're a software engineer, you've likely heard of the "noisy neighbor effect." It's a common computing problem where one application or process can disrupt others on the same system, much like a loud neighbor's party keeping everyone awake and affecting work performance. This term often applies to multi-tenant services where multiple applications share the same infrastructure [1].

Suppose you operate a cloud service for developers to lease servers for their apps. Directly renting physical servers poses a challenge because datacenter servers are often overpowered for most developers' needs. So you devise a solution: you'll break up each server into multiple "virtual" servers. Each virtual server will have its own set of resources, and each developer can rent out a virtual server to run their application. This way, you can make efficient use of your physical servers and offer your service to a wider range of customers with varying resource needs.

But there's a catch: what if one developer's application starts hogging up resources, and uses more than their "fair share"? Suddenly, the other virtual servers on the same box will have fewer resources to split among themselves -- their performance will be degraded.

*...but if someone hogs resources, everyone else gets screwed*

Crucially, this drop in performance is purely due to the other users who were "randomly" colocated on the same physical server as you by your cloud provider. You have no say in the matter.

Fortunately, cloud providers today have taken many measures to mitigate the noisy neighbor effect. For example, they may provide more advanced virtualization techniques that place hard limits on the resources available to any one customer.

But there's one category of cases where the noisy neighbor problem is alive and well: blockchain applications.

Noisy Neighbors on the Blockchain

In one sense, a blockchain is a distributed network of many servers, all working together to maintain a shared ledger of transactions. However, for developers, the blockchain's virtual machine resembles a single-threaded computer with limited, shared resources for all its applications. In essence, blockchains represent the ultimate form of "multi-tenant" infrastructure.

On a single blockchain, you could have hundreds of thousands of applications (smart contracts) vying for these limited resources. And, because these resources are allocated via a market, more competition directly leads to higher costs.

Traditionally, the "speed" and "cost-effectiveness" of transactions are seen as inherent attributes of the underlying blockchain. But this is wrong: these properties are also determined by the usage of the chain, and can change quickly as usage changes. That means if, say, a memecoin happens to take off at the wrong moment, you and your users can suddenly find yourselves paying massively increased gas fees [2].

Source: https://decrypt.co/138989/pepe-meme-coin-hysteria-pushes-ethereum-gas-fees-1-year-high/

This example is not just an issue with Ethereum; all popular chains eventually run into this issue – it's a testament to how successful the chain is in creating demand for blockspace. This is an issue of monolithic blockchains in general. Noisy neighbors can always ruin your day, leading to degraded UX and high costs.

Caldera: Solving the Noisy Neighbor Problem with Rollups

The only long-term solution to the blockchain noisy neighbor problem is to avoid a "multi-tenant" architecture to begin with – building a wall to provide each application with its own “wiggle room.” This is exactly the architecture that Caldera’s rollup chains provide.

Rollups are lightweight, highly-customizable blockchains that inherit security from another blockchain, such as Ethereum or Polygon. With a dedicated rollup, projects get a Layer 2 scaling solution that functions as its own separate blockchain. The L2 chain posts transaction data to an underlying L1 like Ethereum, but offloads computation and storage offchain. This means significantly reduced resource contention between apps. It's like moving from a shared hosting plan to a dedicated server.

Moreover, because rollups are separate from the underlying “shared” L1, dedicated rollups can also be customized to each applications specific needs. Want to minimize transaction costs? You can choose to settle on a less expensive chain. Need tons of compute power? Launch the rollup on a beefier server, and bump up the gas limit. Or maybe you need to dip below the EVM and add new lower-level primitives, like BLS curve operations, ZK-friendly hash functions, or more efficient utilities for memory management.

To maximize flexibility and customizability, Caldera Chains uniquely separate the execution layer from the data availability layer. This means that developers have the freedom to choose their preferred Settlement layer and data availability solution, making the experience more personalized and flexible. For example, Caldera Chains can settle to any EVM compatible blockchain, including Ethereum, Polygon, Avalanche, and more. The developer can also choose to use a dedicated data availability layer such as Eigenlayer or Celestia, for improved scalability [3].

Source: https://blog.caldera.xyz/hop-into-the-drivers-seat-with-caldera-chains/

Moreover, we also prioritize simplicity in design. This includes providing a comprehensive set of features to streamline the process of building, deploying, and maintaining decentralized applications, including a high-level API for ERC20 and ERC721 tokens, JSON-RPC nodes, a bridging SDK, graph indexing, oracles, and Gnosis Safes. These are all tools that ensure that developers can focus on creating great experiences, without needing to wrangle with deploying auxiliary infrastructure that their project depends on.

From on-chain games such as zkHoldem, Curio, to the DeFi protocol Syndr, to the Lootverse, Caldera empowers applications to concentrate on delivering the best app experience for end users, while we take care of the underlying infrastructure.

The Horizon for Rollups: Balancing Liquidity with Customization

As Caldera and other rollup ecosystems gradually mature though, one big question that remains is liquidity fragmentation.

Going back to the “noisy neighbor” problem, the way that rollups solve this issue is quite straightforward: build a wall between them. But sometimes, you do in fact want to talk to your neighbors. This is particularly true for DeFi and NFT use-cases, where cross-chain liquidity allows for more efficient marketplaces and applications. Essentially, instead of a solid brick wall between our neighbors, we want a door: an interoperability and bridging method that we can securely open and shut at our will.

Bridging, of course, is a notoriously difficult problem. It has two distinct challenges: the tech part (how do I not lose my money), and the UX part (how many buttons do I need to click). Much of the attention has been focused on the tech part of the problem, and we’re fortunate to be working with Hyperlane to bring permissionless interoperability to Caldera chains [4].

Source: https://blog.caldera.xyz/partnering-with-hyperlane-enabling-interoperability-for-caldera-rollups/

For us though, the more interesting problem is the UX part, or what one might call “last-mile bridging.” The focus here is to abstract over the complex technicalities of bridging for the end-user, and make that “last mile” more automated. There are already multitudes of solutions for bridging between general-purpose chains like Ethereum, Optimism, Arbitrum, Polygon, et cetera, but few to none are currently able to accommodate thousands of new appchains.

Thankfully, Ethereum rollups have a bridge built into the protocol, allowing liquidity to be bridged into the L2 starting from day one, without any external bridging providers being necessary. However, these native bridges only support tokens from the settlement layer, and as such don’t support cross-rollup bridging or bridging from alternative layer-ones. In collaboration with third-party bridging providers like Hyperlane and LayerZero, and thanks to the efforts of our engineering team, we hope to radically simplify the bridging experience in the coming months.

Although cross-chain architectures for rollups are still in their early stages, we believe that this inter-rollup, multichain future offers new tantalizing possibilities and novel cross-chain applications. To deliver on that potential, though, the ecosystem needs to view bridges not just as technical puzzles, but as tools to open up composability and access to liquidity. The end goal should be minimizing friction for end users and developers building in this cross-chain world.

About the Author

Matt Katz is the co-founder and CEO of Caldera, the leading rollups-as-a-service provider for Arbitrum Orbit and OP stack blockchains. In the past, Matt worked in product engineering at several startups, worked on iOS performance at Apple, and did a stint in the mobile games industry. He studied Computer Science at Stanford University.