Ethereum’s Plasma, a different state of matter  

Scalability has become a mix between a mantra and an obsession. With the rising adoption of crypto-assets, early systems like Bitcoin are having issues scaling. This widespread concern was around for a while, since people were already aware of the difficulties entailed by a 1mb block in Bitcoin. The problem manifested clearly in 2016 and 2017, when BTC transactions where very slow and very expensive.

Like Bitcoin, Ethereum hit a hard wall in terms of scalability. It was proven in many cases that wide adoption would bring the network to its knees, cryptokitties being the most famous example. This made clear the necessity of a scaling solution, and Plasma came along. In the following article, we explain the basics of the Plasma upgrade.

In order to understand Plasma, it is good to talk about the Lightning Network (LN) first. LN is a system built on top of Bitcoin that lets people send/receive payments really fast and reduces transaction fees by keeping them off the main net. LN is a smart contract built on top of the  BTC blockchain that works as follows:

  • A multi sig wallet holds some BTC, and it is set up by one of the two parties.
  • The wallet address is saved to the public Bitcoin blockchain with a balance sheet proving how much of the BTC belongs to who.
  • Once the payment channel is set, it is possible  for the parties to conduct unlimited transactions without touching the blockchain.
  • With each transaction, both parties sign an updated balance sheet that reflects the balance of each party.
  • The balance sheet is not updated to the blockchain, only the transaction parties keep a copy of it.
  • Whenever there is a dispute or the payment channel is closed, both parties use the balance sheet to pay  out their share in the wallet

The LN basically creates a payment channel that lets everyone transact with each other directly instead of having to broadcast their interactions in the blockchain. This saves time and money, and guarantees that only fundamental operations are tracked on the blockchain.

Like the LN, Plasma is a technique for conducting off-chain transactions while relying on the Ethereum blockchain to ground the securities. Off-chain techniques like this and LN sufficiently guarantee a level of security and finality. Fortunately, the features of Plasma dont stop here.

Plasma takes it further by introducing the creation of “child” blockchains attached to the “main” Ethereum blockchain. The child chains can spawn further chains, so Plasma would let multiple blockchains branch out from one root blockchain. The Ethereum blockchain will still be handling smart contracts the same way, but it will only record finished transactions to the Ethereum blockchain. The idea of this is that the chains work in a hierarchical way in which more complex operations happen in the child-blockchains in order of running everything on the main-chain. This enables faster speeds and lower transactions since these records do not have to be replicated across the Ethereum blockchain.

Plasma will work by using the Ethereum blockchain as an entry that contains only the basic rules of the child-chain. After basing the child-chain in the main blockchain, this new chain features its own consensus algorithm and is independent from the main Ethereum blockchain. Once this child-chain is set, some rules can be set, including smart contracts that determine the logic of any function that is to occur in that given chain.

Once the child-chain is running, block creators periodically commit a validation to the main-chain, proofing that the current state of the child-chain is valid according to the consensus rules. A user will interact with the child-chain without ever interacting with the main-chain directly.

After all these great proposals, a natural question arises, are the child-chains in Plasma secure and immutable? Fortunately, the answer is yes. Plasma guarantees that every party can always withdraw their funds and assets back to the main chain. This is great, because if there was a case in which an attacker takes control of the network, your funds would simply be moved back to the main chain. This security mechanism is called a “Plasma exit”.

The plasma exit mechanism works as follows: once a user transacting in a Plasma Chain wants to transfer his funds back to the main-chain, he has to submit an “exit transaction”, this in turn creates a “challenge period”, similar to Bitcoin´s Lightning network disputes. After this dispute is set, the challenger provides a proof that marks a claim as invalid, in Plasma this can be a Merkle proof of the transaction history. To make things safer, are also required to attach a small bounty to it, in order to incentivize people to challenge you, if they believe your behavior was malicious.

We could sum up the benefits of Plasma as follows:

  • It helps the Ethereum blockchain handle much larger datasets.
  • It increases the transaction capacity of the Ethereum blockchain.
  • It lowers fees.
  • Gets rid of data that is not necessary on the main chain.

The advantages of plasma are very clear. Even though it is still in early stage development, the technology promises to tackle some of the most important issues on the blockchain sphere: scalability, speed, and cost. In the coming future, projects that have extensive proposals to improve scalability, like Ethereum, are the ones that will thrive.

You might be thinking now, where does Pool of Stake fit in here? The answer is everywhere! With the coming Casper upgrade for Ethereum , PoS will be the consensus algorithm that runs in it, and we will be able to pool ETH in order to stake. It is very exciting to be part of the change to PoS by arguably the most important project. We are looking forward to the Casper and Plasma upgrades. Once they are set, particularly Casper, PSK users will be able to generate ETH as a passive income, while contributing for a more secure blockchain.