To power many more transactions in the future, Ethereum won’t rely on a single mechanism but rather on a series of innovations in sharding, Plasma, Casper, and state channels.

The first three of those innovations are still on the horizon for now, set to be activated in the multi-phase Serenity upgrade that will begin next year with Phase 0, in which Casper style Proof of Stake consensus will be rolled out first to secure a new “Beacon Chain.”

But what if Ethereum could scale to 50 transactions per second (up from roughly ~15 TPS at present) and possibly beyond before Serenity even begins?

That’s where the new scaling solution known as Fuel, a sidechain technology based of the “optimistic rollups” technique that’s recently been gaining considerable attention in the Ethereum community, comes in.

A Permissionless Sidechain to Speed Up Token Payments

This week, the non-profit developer group Fuel Labs revealed its Fuel sidechain, which specifically takes aim at lowering the gas costs for stablecoin payments, which the Fuel Labs team argues the “killer app for any blockchain.”

The problem? These tokens are used often (Tether has spent well over 2,000 ETH on token transfers over the last 30 days, for example) and so take up a non-trivial amount of block space.

If this block space can be freed up by making stablecoin transactions considerably cheaper, then the throughput capability of Ethereum will improve in kind. And that’s precisely what Fuel — which is hailed as “sustainably scalable, cheap, and reliable” by its makers — has been designed to do.

We are proud to announce Fuel, a trustless sidechain built with optimistic rollups. The first step towards scaling Ethereum sustainably.https://t.co/2if45HTR0L — Fuel Labs (@fuellabs_) October 22, 2019

“The Fuel sidechain is designed exclusively handle large volumes of payments on Ethereum, and will reduce the cost Ethereum ERC-20 token transfers (at conservative estimates) by 5-fold pre-Istanbul,” the Fuel Labs team said in announcing their new sidechain.

But that’s not all. The project’s developers said that after Istanbul, which doesn’t have an activation date yet but will be launched imminently, Fuel could potentially help Ethereum achieve up to 200 TPS. The programmers noted further upgrades could push that mark into “the high 2000s” and even beyond to “millions of TPS.”

Notably, the sidechain tech will be imminently deployed after its code is finished being audited . And Fuel’s builders have more innovations coming down the pipeline, too.

“Also stay tuned for our own custom scripting system … which will enable smart contract functionality on the Fuel sidechain,” the project’s builders said.

What Sets Optimistic Rollups Apart?

Optimistic rollups are relatively new on the scene, so plenty of stakeholders in the space have some catching up to do when it comes to wrapping their heads around what they are.

Let’s use Plasma tech for a comparison. Plasma chains are akin to advanced sidechains that facilitate off-chain transactions while using the Ethereum mainnet as a foundation, though they use a semi-trusted format and thus aren’t wholly permissionless — a “Plasma operator can censor transactions on the Plasma chain at will,” ConsenSys researcher John Adler has previously explained.

On the other hand, optimistic rollups like Fuel rely on on-chain data availability and can be entirely permissionless.

And unlike state channels that first have to be collateralized to work, no such collateral is needed in an optimistic rollup. Another point of difference between state channels and optimistic rollups is that such channels provide instant transaction finality, whereas optimistic rollup transactions are completed when the Ethereum blocks that contain them are finalized.

In other words? These rollups offer another promising addition to the Ethereum scaling repertoire. And in contrast to some of the smart contract platform’s planned scaling innovations, mechanisms like Fuel can be implemented before the coming Serenity upgrade begins at some point next year.