How Layer 2 Solutions Are Helping Ethereum Scale

ZK-Rollups enable faster settlement of L2 transactions on the Ethereum L1 using only proof of computation. The Ethereum network must verify proof of computation for batches of L2 transactions. Layer 0 networks are also optimized for cross-chain interoperability, as it becomes easier for the various L1s connected to a single mainchain to speak with one another. Users who leave centralized payment services like Paypal because of their 3% fees are no better off if they have to spend $200+ to make a single transaction on Ethereum. The scalability trilemma is a persistent problem that has plagued blockchain developers ever since the Bitcoin blockchain was launched in 2009.

https://www.beaxy.com/ 2 blockchains like Arbitrum and Optimism make DeFi more scalable and more accessible. DApps like UniSwap, Aave, SushiSwap are used by tens of thousands of users every day on Layer 2 blockchains. Even though the technology stack is relatively new, the rate of adoption is proving its apparent product-market fit. With Layer 2 blockchains, transaction costs are lower and throughput is faster, allowing for new use cases for blockchains, further increasing the value proposition of DeFi. In order to use dApps and DeFi platforms on Layer 2 chains, users must have access to assets on Ethereum and be able to bridge their assets to a Layer 2 chain.

Maintain security

OMG ethereum layer 2 scaling solutions does so by transferring the processing of the transaction outside the Ethereum mainnet, using it only for the final settlement. Further, it batches the transactions, making the process more efficient and less resource-intensive. Optimistic rollups currently dominate the layer 2 landscape but general purpose ZK-rollups are coming and can become the preferred layer 2 solution as they offer faster finality and may also offer privacy features. Ethereum 2.0 and general purpose rollups have the potential to make DeFi, NFTs, and other Ethereum dapps much more accessible and cost-effective, and even provide an efficient framework for micropayments. Alchemy Supernode finally makes it possible to scale blockchain applications without all the headaches. Sign up for a free account with Alchemy, the world’s biggest blockchain development platform, supports popular L2s, including Arbitrum, Optimism, Polygon, and StarkNet.

Rollups perform transaction execution outside layer 1 and then the data is posted to layer 1 where consensus is reached. As transaction data is included in layer 1 blocks, this allows rollups to be secured by native Ethereum security. For this reason, Arbitrum’s gas fees are somewhat higher than on Polygon but still significantly lower than on Ethereum.

Drawbacks to Layer 2 Scaling

The article ethereum layer 2 scaling solutionss insight into the potential benefits of Ocean Protocol and The Graph Token, it highlights the differences between them. By the end of this analysis, you will have a better understanding of how both tokens can be used in the current market. There are many L2 solutions, each with its own strengths and weaknesses and tradeoffs. It is advisable to think carefully about your application’s requirements and to study the available options before making a selection. Several projects provide implementations of Plasma for dApp integration, including OMG Network and LeapDAO.

Important data relevant to the smart contracts are requested less frequently than layer 1 blockchains. This saves large amount of processing power, and less of the blockchain capacity is used for transaction validation. PoS is a different kind of consensus mechanism blockchains use to agree on a single true record of a data’s history. Using PoS introduces sharding, a potential L1 scalability solution for Ethereum. Simply put, sharding refers to splitting the entire Ethereum network into smaller, multiple portions called ‘shards’. Sharding is one of the most complex scaling solutions, but the basic idea is to split up transaction processing between smaller groups of nodes to increase the amount of transactions that can happen.

What Is Ethereum 2.0?

The network is home to big industry names like Consensys, Sushi, and Uniswap. Scale the Ethereum network by using key actors known as aggregators who compile batches of transactions off-chain and send them to a smart contract on the main chain via fraud proofs. This allows the network to reach a consensus on a batch of transactions as opposed to each transaction. Projects providing implementations of Validium include Loopring and StarkWare.

Layer-2 scaling solutions are the technology that runs on top of a blockchain protocol that improves the speed and efficiency of the underlying blockchain. Note the explanation in the video uses the term “Layer 2” to refer to all off-chain scaling solutions, while we differentiate “Layer 2” as an off-chain solution that derives its security through layer 1 Mainnet consensus. While speed and throughput are important, it is essential that scaling solutions enabling these goals remain decentralized and secure. Keeping the barrier to entry low for node operators is critical in preventing a progression towards centralized and insecure computing power.

• The main network is responsible for validating and finalizing all on-chain transactions without depending on another network.
• In addition, coupled with the benefits of the PoS transition, the new Polygon zkEVM development will make it possible for Ethereum to reach greater milestones.
• Off-chain solutions are implemented separately from layer 1 Mainnet – they require no changes to the existing Ethereum protocol.
• Reduces costs since it publishes minimal data on Ethereum and doesn’t have to post proofs for transactions, except in special circumstances.
• We recommend checking out their resources when researching specific layer 2 projects.

A sidechain is secured by its consensus mechanism, while L2s benefit from Ethereum’s consensus. Currently, Ethereum’s ability to handle transactions is limited to processing 7-15 transactions per second . Conversely, traditional, centralized databases—like Oracle Database and Microsoft SQL Server—can process thousands of transactions per second.

It reduces the fees by an estimated 1/3rd, compared to before, all while maintaining Ethereum’s security. Currently, rollups can process 1,000–4,000 TPS, which is good, but still not valid for certain applications, such as global-scale micropayments. However, as we discussed in Crypto in a Portfolio, major upgrades are coming to Ethereum, including the transition to proof of stake and shard chains. The latter is predicted to increase the Ethereum chain’s data availability more than 20-fold.13 Rollups will get more than a 20x TPS boost, making them able to process up to roughly 100,000 TPS. Since Bitcoin’s inception, a primary focus for developers has been designing systems that can process a higher number of TPS with minimum fees.

The EWASM of Parastate helps in sharing the data structure of accounts and blocks in the EVM. Parastate is a trustworthy platform on the grounds of its dual token structure. In addition, it also issues pDOT to users as incentives for staking and locking DOT tokens for supporting and bidding for the slot auction on Parastate parachain on the Polkadot network. The increasing number of applications and users on Ethereum is responsible for increasing the load on the network. Therefore, the cost of using the network increases prominently with more and more users competing with each other for adding transactions to the Ethereum network. Layer-1 refers to the distributed database itself — the network that brings all of the blockchain’s nodes together into one system with its underlying consensus mechanisms.

Ethereum protocol

It consists of high-performance side chains executing sub-second block times, running up to 2,000 TPS per chain. Skale can support full-state smart contracts, decentralized storage, execute Rollups, and machine learning in EVM. SKALE network is an open-source security and execution Ethereum Layer 2 scaling solution, which relies on elastic side chains to divert processing off the mainnet.

In addition, it can also ensure prolific improvements in transaction speed for Ethereum users. Developers could easily create Solidity smart contracts capable of running on Optimism, albeit with certain exceptions. Off-chain solutions are implemented separately from layer 1 Mainnet – they require no changes to the existing Ethereum protocol. Some solutions, known as “layer 2” solutions, derive their security directly from layer 1 Ethereum consensus, such as optimistic rollups, zero-knowledge rollups or state channels. Other solutions involve the creation of new chains in various forms that derive their security separately from Mainnet, such as sidechains, validiums, or plasma chains.

According to the project themselves, transactions on the xDai chain are “very fast, very inexpensive, and require a single token .”ZKSWAPThis is another very unique layer 2 scaling solution built on top of Ethereum blockchain. Polygon, formerly known as Matic Network, is an Ethereum scaling solution from the perspective of developers. As a result, Polygon doesn’t inherit Ethereum’s security and decentralization guarantees like Arbitrium and Optimism. Polygon is able to outperform Ethereum in transaction throughput and significantly reduce transaction costs for users, however, it is rapidly approaching its limits as a result of its popularity.

However, long wait times for on-chain transactions are possible due to the potential fraud challenges. Blockchains are set to become more scalable as the tech behind layer 2 solutions and interoperable blockchains evolves. With shard chains and rollups evolving, DeFi, NFTs and more will be accessible to many more users as transaction costs become a fraction of what they are currently. With 100,000 TPS, ZK-rollups could be an efficient framework for micropayments when ETH 2.0 is out thanks to their fast finality and low fees.

Arbitrum and Optimism, both Optimistic Rollup networks, are the two most popular Layer 2 solutions based on daily transactions. The pattern holds true beyond a 24-hour timeframe and it is not surprising given that they both launched their public main nets before any zero-knowledge rollups. The ZK-rollups layer 2 scaling solution ETC performs better than layer 1 due to the off-chain storage of data.

The process starts by sealing off a portion of the blockchain via Multi-signature to allow for a direct interaction without needing to submit anything to the miners. Once the transaction is confirmed, the final state of the channel is added to the blockchain. Layer-2, however, is an overlaying network that sits on top of the blockchain. Plasma, Polygon, Optimism, and Arbitrum are just a few of the Layer-2 networks built on Ethereum. While these are in the roadmap, further scaling through layer 2 networks is still necessary.

The scalability trilemma remains one of the biggest issues of the blockchain. Layer 2 is a collective term to describe a specific set of Ethereum scaling solutions. A layer 2 is a separate blockchain that extends Ethereum and inherits the security guarantees of Ethereum. As the number of people using Ethereum has grown, the blockchain has reached certain capacity limitations.

Additionally, as the ZK-rollup contract has already verified the transactions, there are no delays in moving from layer 2 to layer 1. Think of L1 as the settlement layer, making sure everything balances, is secure and is running efficiently. Whereas L2 is where all transactions are batched and processed before being sent to L1 for reconciliation.

To describe Layer 2, they are the ones which work upon the base blockchains in order to increase the scalability and efficiency of the network. As a layer 2 scaling solution, the protocol requires transferring of some of the transactional load of the blockchain protocol in order to adjust the architecture of the system. Following that, the network handles the processing load and reports back to the main blockchain to then finalise the results. One of the most important objective of increasing the scalability for the Ethereum network is to improvement in transaction speed along with the transaction throughputs.

This has driven up the cost of using the network, creating the need for “scaling solutions.” There are multiple solutions being researched, tested and implemented that take different approaches to achieve similar goals. Note that xDai is not only a decentralized sidechain but also a stablecoin pegged to the BNB USD. Thanks to its proof-of-stake consensus, users can stake their xDai to secure the network in exchange for a reward any time other traders execute transactions. Founded by young Australian brothers Robbie and James Ferguson, Immutable X has become the go-to L2 network for NFT marketplaces. As the first sidechain specialized in NFT trading, Immutable X doesn’t charge any gas fees and provides an amazing transaction speed of up to 9,000 TPS with instant confirmation.