Bankless: In addition to the “Big Four”, what are the next-generation L2s?

Dear Bankless veterans, cryptocurrency has always been on the path of continuous development. When a technological innovation takes the lead, other projects and technologies will just follow in its footsteps.

This is what we see now with layer 2 networks.

While names like Optimism and Arbitrum are well known in cryptocurrencies, the current wave of a whole new generation of Layer 2 technologies is poised to challenge the existing ecosystem.

This also means that the second-layer network is no longer synonymous with the Big Four.

In this article, Bankless analyst Ben Giove covers the sleepy giants of Layer 2 technology that irons need to know about right now:

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Ethereum’s Layer 2 (L2) ecosystem continues to experience rapid growth. Currently, the total locked volume of the twenty-two Layer 2 network projects has exceeded $4.36 billion, an increase of 1194% from a year ago.

As the saying goes, where there is growth there is competition. As people pay more and more attention to this track, the competitive landscape within the second layer network ecosystem is also intensifying.

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Total lock-up on Ethereum’s Layer 2 network – Source: L2 Beat

So far, most of the discussion around Layer 2 networking has focused on the “big four” common rollups. These include Optimism and Optimistic Rollup (ORU) in Arbitrum, which are live now and have a rapidly growing user and developer base.

The Big Four also include zkSync and zk-rollups (ZKRs) in StarkNet. While their performance is high, both fall short of the ORU counterpart (more on that in the next sections).

However, there are already a few Layer 2 networks on the market, and while these projects are less well known at the moment, they are waiting to disrupt existing networks. Some of these networks bring unique design choices and capabilities, while others are highly specialized for individual use cases.

Irons, let’s take a look at these low-key Layer 2 networks and see what the hype is all about.

Fuel

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Fuel is an Optimistic Rollup.

Fuel is unique in that it uses its own custom virtual machine, Fuel VM, with smart contracts written in Sway . This means that unlike most Layer 2 networks, Fuel is incompatible with the Ethereum Virtual Machine (EVM), a factor that could hinder further adoption.

Fuel also differentiates itself by using a UTXO model (same as Bitcoin) rather than the traditional account-based model commonly used by Ethereum and second-layer networks. These unique design choices give Fuel high performance because the network is able to validate multiple transactions in parallel, rather than serially (one at a time) like other networks.

Fuel also has a better user experience than other Layer 2 networks. Instead of the 7-day withdrawal time required for a traditional Optimistic Rollup, users on Fuel can use an atomic swap bridge to return the user’s withdrawn funds to the Ethereum mainnet in minutes. Additionally, traders can pay for gas in any token, not just ETH . Although like any second-layer network, the network must still purchase Ethereum block space to verify proofs.

The first version (V1) of Fuel was launched in December 2020, and the developer’s focus has recently shifted to work on the second version (V2) of Fuel. The Fuel Labs team recently launched SwaySwap, a decentralized exchange , on the Developer Network . Uniquely, the assets on SwaySwap are completely native to Fuel, which means they inherit the same functionality as native assets like ETH on Ethereum.

While Fuel’s lack of Ethereum Virtual Machine compatibility may put it on a slower growth trajectory, Fuel’s features and throughput relative to other ORUs should help it further attract developers and scale in the long term range of use.

Scroll

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Scroll is a zk-rollup (ZKR) that develops zkEVM (Zero Knowledge Proof Ethereum Virtual Machine).

zkEVM has the potential to fundamentally change how Layer 2 networks and entire blockchains scale.

Aside from the difficulty of implementing ZKR in production, a major barrier to adoption of the technology is its lack of Ethereum Virtual compatibility. While ZKR performs better in terms of throughput and gas fees, its inability to easily integrate the Ethereum Virtual Machine into zero-knowledge proof technology has forced each ZKR to build unique developer tools and infrastructure from scratch .

This is why many consider zkEVM to be the “terminator” of Layer 2 network scaling, as it allows ZKR to inherit the network effects of the Ethereum Virtual Machine while maintaining the same, high level of performance.

While other competitors such as zkSync and Polygon (more on this below) are developing zkEVM, one factor that may make Scroll compete with these projects is that it aims to be an Ethereum Virtual Machine equivalent. This means that contracts deployed on the Ethereum mainnet can be ported to Scroll without any substantial changes to the codebase. This should help promote further adoption of Scroll, as it greatly reduces the difficulty of migrating projects to the web.

Scroll is currently taking the first steps towards realizing this potential, as it recently announced plans to launch a pre-alpha testnet where users will be able to transact and try out individual applications.

Aztec

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Aztec is a privacy-focused zkRollup.

Aztec provides users with privacy through its unique transaction architecture. While the overall network is complex, at a high level this architecture functions like a UTXO model and uses zero-knowledge proofs to transfer ownership of assets while protecting the identities of any involved parties.

One of the main use cases for Aztec so far has been decentralized finance with privacy attributes via Aztec Connect .

Aztec Connect provides users with the ability to directly interact with smart contracts deployed on the mainnet, which are deployed within the second layer network. This means that users can inherit the privacy of Aztec, while also gaining the liquidity and composability of Ethereum dApps. Additionally, despite being able to interact directly with the mainnet, Aztec users pay minimal gas fees because, like any rollup, Aztec gas fees are still settled in batches and amortized across all traders. According to data from L2 Beat, Aztec Connect currently has a total locked volume of $3.12 million.

The most popular personal application of the project is zkmoney, a transaction blocking service. zkMoney enables users to conduct private transactions with various well-known mainnet protocols such as Uniswap , Aave , Compound , Lido , and more.

As more applications are built on the network and the value proposition of cheap, private transactions becomes clearer, Aztec should continue to grow in this niche. It is worth mentioning, however, that in the short term, regulatory issues related to privacy projects may affect the further development of Layer 2 networks.

Immutable X

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Immutable X is a verification platform built with StarkEx.

Immutable X is considered a Validum because transaction data is stored through an off-chain solution called the Data Availability Council, rather than entirely on-chain. While this means that Immutable X has more trust assumptions relative to other rollups that settle to Ethereum, it allows the network to significantly reduce transaction costs, which can fully subsidize end users.

Immutable X is governed by the IMX token. In addition to these rights, IMX holders can stake their tokens to earn 20% transaction fees, as well as a 2% protocol fee that includes all secondary NFT transactions on the Layer 2 network.

Immutable X is focused on gaming, with a number of high-profile projects currently on the network such as Gods Unchained, an NFT-based trading card game, and Illuvium, an auto-battle game with 3A-quality graphics currently in private beta.

Illuvium recently held a $3.3 million land auction on Immutable X, and the Layer 2 network has also successfully formed partnerships with prominent brick-and-mortar companies such as Disney, Gamestop, and Turner Sports.

These partnerships, along with the public releases of Illuvium and other sizzling titles like Shimmering Sword and Guild of the Guardians, seem poised to further catalyze the continued growth and adoption of Immutable X.

Polygon zkEVM

Bankless: In addition to the "Big Four", what are the next-generation L2s?

Polygon is developing a suite of ZKRs, the most prominent of which is the Polygon zkEVM.

Similar to Scroll, Polygon’s zkEVM was revealed the day before it went live, and it has the potential to fundamentally shake the landscape of Layer 2 networks.

Like its competitors, Polygon’s rollup will be comparable to the Ethereum Virtual Machine, enabling developers to deploy their mainnet contracts to the second layer network almost seamlessly. zkEVM will also leverage the Plonky2 validator system developed by Polygon Zero, another ZKR that was brought into the Polygon ecosystem following the $400 million acquisition of Mir. Plonky2 enables proofs to be verified incredibly fast, which reduces the time it takes for layer 2 network transactions to reach final results.

zkEVM plans to launch its testnet sometime in the summer of 2022, with a mainnet deployment planned for early 2023.

Polygon has a large developer and user base on its proof-of-stake ( PoS ) chain, and after acquiring other teams working on zero-knowledge proof technology like Hermez , it has a large pool of in-house talent and a constant stream of high-profile partner announcements , Polygon seems poised to become a force in the zero-knowledge proof ecosystem for the foreseeable future.

A world where multiple Layer 2 networks coexist

Between Fuel, Scroll, Aztec, Immutable X, and Polygon’s zkEVM, as well as many others not mentioned in this article (there are many other Layer 2 networks outside the “Big Four”), these projects seem poised for future Rapid development in a few months.

Fuel, Scroll, and Polygon’s zkEVMs are all general purpose platforms that may lead to higher performance and a better developer experience relative to incumbents, while Aztec and Immutable X continue to excel in their respective areas of privacy and gaming implement.

It’s unclear how things will play out and who will emerge victorious. But it is more certain that for the foreseeable future, we will live in a world where multiple Layer 2 networks coexist.

Action steps

  • Put your Layer 2 networking knowledge to work and double the number of airdrops
  • Watch the Trillion-Dollar Second-Tier Network Opportunity podcast episode

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/bankless-in-addition-to-the-big-four-what-are-the-next-generation-l2s/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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