In November 2023, Ethereum Co-Founder Vitalik Buterin brought back the discussion for Plasma, a model first developed in 2017 to create a scalable, low cost transaction system for Ethereum.  While the original model held promise, it could only add value while creating all new problems.  However, with the maturation of Zk-SNARKS, Buterin suggested that the Plasma model could hold new value for Ethereum. The rollup model has done much of the heavy lifting toward scalability, but the "Neo-Plasma" model could provide strong security while still maintaining very low transaction fees.  This type of balance could help add entire sectors of economic value, and could crack the code on developing large, scalable business models that have never been possible before due to profit-killing gas fees.

Let's take a fresh look at Plasma, how it transforms with the addition of Zk-SNARKS, and what that could mean for the greater economy, for new business opportunities, and for the Web3 industry's ultimate goal of reaching mass adoption across the globe.

Plasma Basics

While Buterin's post provides a solid and detailed overview of Plasma, the basics are critical in order to understand its shortcomings and the opportunities created with Neo-Plasma. The Plasma model was designed to pull many of the processing and computational tasks off of the Ethereum mainnet, saving significant time and money by only posting the verified final states.  The Plasma chain would be created by an operator, whose job it was to create new blocks regularly.  Each block would be in the form of a Merkle tree, showing the transition of assets changing hands over the course of the block.  Users could examine the tree to see what transactions affected them.  One problem with this model was that the operator could misbehave in two ways, either by creating an invalid block, or an unavailable block.  In this model it is up to the user to identify any issues created by the operator.  To resolve an issue the user would need to exit within seven days, providing proof through their copies of blocks that an error was made.  This would have a seven day challenge period, resulting in far from instant transactions.  

The issues were compounded by the heavy client-side data storage needed to prove validity should a problem arise, and the new problems created as soon as use cases did not hold clear ownership of assets. The use of NFTs being transferred is ideal for this model, but the use of fungible coins requires cumbersome solutions (such as creating an NFT for each denomination of each coin) that then create further problems (like the fragmentation of assets).  More solutions create new problems, until the model becomes too unstable for widespread use.  This is exactly what happened, and eventually rollups took the role of providing scalable, secure transactions with reasonable fees. On why rollups superseded Plasma, INTMAX Co-founder Leona Hioki said, "It is thought to be based on the premise that separating the Data Availability (DA) Layer makes DA very cheap. However, like any good technology, there are trade-offs, and too cheap DA may not provide adequate security. Since Plasma is essentially completely free from DA, it can be said that Plasma actually has the potential to scale Ethereum the most."

What Could Be Possible With Neo-Plasma?

Neo-Plasma adds the functionality of Zk-SNARKS to the original Plasma model, which drastically improves its performance.  It does this by eliminating the heavy data and time penalties for validating historical transactions, meaning transactions can be instant and much more manageable for each user.  

Dr. Nir Haloani, the Chief Technology Officer at the privacy centric Ethereum Layer 2 solution Coti, said, "The resurgence of interest in Plasma is largely due to advancements in zero-knowledge proofs, specifically ZK-SNARKs, which can help overcome Plasma's previous limitations. These advancements allow for the efficient addressing of client-side data storage challenges and enable the creation of Plasma-like chains running an EVM. The improvements in ZK-proofs provide a wider array of tools for developing more effective constructions." 

The result is that the promised benefits of the original Plasma model can now be realized, but without the inevitable complications and costs.  This Neo-Plasma approach can provide solid security (it can't beat the rollup model but is still better than other approaches), and can create very low transaction fees.  A scalable, fast, and cheap solution provides countless new use cases for the Ethereum ecosystem. 

However, Cais Manai, the Chief Product Officer at Ten, the Layer 2 rollup that hyper-scales and encrypts Ethereum, believes that Neo-Plasma doesn't fully address Ethereum's scalability and privacy issues.  "ZK offers robust privacy protections, enabling highly scalable private payment and token transfer scenarios. However, ZK cannot be used for complex general-purpose smart contracts, particularly those that require shared private state, e.g. DEXs and on-chain games, making the idea of leveraging neo-Plasma to address Ethereum's scalability and privacy issues limited."

To see where Neo-Plasma could add the most value, it's important to see where Ethereum is currently limited.  The average cost for gas fees on the mainnet were $9.41 USD.  Although scalable models can help reduce this for their communities, even a fraction of this fee is still too high for many different applications.  Business models that require large numbers of microtransactions quickly become unprofitable, and the number of potential business models that fit this behavior is significant.  Many banking, gaming, microservices, etc., would benefit significantly from the security offered by the Ethereum platform, and could create new ways to interact with customers by using blockchain's immutability characteristic for verification services, data storage, auditing, credential storage/validation, and countless other examples.  

Mass Adoption And The Mainstream Economy

The biggest value that Neo-Plasma could offer with these new business cases wouldn't necessarily be from the current Web3 community, but with more traditional companies.  By showing these companies products and services that could benefit them, or could allow them to offer new opportunities for their own customers, Neo-Plasma could act as an adoption onramp for high volume, microtransaction based companies.  With established companies working to adopt Web3 processes into their current businesses, this level of adoption could potentially happen much faster than with the more typical startup model seen in many Web3 ecosystems.  

Final Thoughts

Buterin's discussion on the Neo-Plasma model is well timed and full of promise.  Sometimes good ideas just aren't ready for the world; they are ahead of their time, waiting for the rest of technology to catch up.  Plasma showed great potential, but needed that final piece of the puzzle to be developed and matured enough to make a difference.  Now that Zk-SNARKS have been put through their paces, they are ready to be paired with models like Plasma to create great things.  With the potential it offers, Neo-Plasma could be the start of a major Web3 adoption wave from traditional companies, discovering the many amazing (and profitable) use cases that make up this growing ecosystem.