If you don’t add a layer2 recently, how can you say you know blockchain with others?

The layer2 extension solution has already given us some relief from these terrible gas costs – hopefully their launch will solve the network congestion problem forever.

If you don't add a layer2 recently, how can you say you know blockchain with others?

Ether is by far the most useful of all cryptocurrencies: it adds value, generates revenue, is used in DeFi apps, and more and more use cases are popping up every week.

Ether also has a crazy roadmap for the rest of the year. From a supply perspective, ETH2 will allow users to pledge their ETH and generate a “conservative” 5-8% annual yield, possibly as high as 25%, locking it out of the liquidity market. eip-1559 will make ETH a deflationary asset, beating bitcoin’s fixed inflation rate.

From a demand perspective, gas costs have been kept in check through a series of initiatives such as the Berlin hard fork, Flashbots and the introduction of layer2 extension solutions.

If you don't add a layer2 recently, how can you say you know blockchain with others?

We know that Ether has been plagued by network congestion, which has led to high gas fees on the network.

This is not the first time this has happened in a bull market. 2017 also saw the NFT app CryptoKitties and the ICO bubble lead to a wild spike in Ether gas fees, which were as high as 500gwei for a while.

Layer 2 will save ethereum
The layer2 extension solution has given us some relief from these terrible gas fees – hopefully their launch will solve the network congestion problem forever.

“layer2” refers to a group of solutions that plan to extend the layer1 blockchain (in this case, Ether – but any “core” blockchain is called layer1. For example, Bitcoin, Solana, etc.), which is done by increasing the speed and throughput of the network.

These solutions are called layer2 because they conceptually sit on top of the ethereum network.

At a high level, these solutions look to move transactions and network activity from Ether to their L2 chains and communicate regularly with L1 to coordinate status, funding, data, etc.

Users can think of this as a filtering mechanism where Ether will know only the most important information in the L2 solution.

Interestingly, many of these solutions look a lot like standalone blockchains that are “friendly” to the Ether platform and ecosystem – meaning that instead of stealing Ether’s activity like other layer1s, they work with Ether to process their transactions.

The problem with layer2 is that there are too many solutions – in an industry with extreme network effects, frankly, a cohesive L2 solution on top of Ether would benefit greatly.

But each chain has a way of weighing technical solutions, and they are all vying to launch and win over dapps and users.

Types of layer2 solutions
Side Chains
Sidechains are essentially completely independent blockchains. However, they are a branch of ethereum, so they are compatible with evm and can be quickly deployed to existing dapps running on ethereum.

xDai is a blockchain designed to be used on Ether for fast and cheap payments.

Plasma/ Subchain
Plasma is a framework for building applications on Ether. At a high level, Plasma allows the creation of subchains, i.e. copies of Ether on another chain.

So, unlike processing every transaction on the Ethernet network, some transactions can be filtered and moved to multiple subchains – instead of processing every transaction on the Ethernet network and reconciling funds and state less frequently at a predetermined pace.

Polygon/Matic is an example of a Plasma implementation that has done a lot of work on GTM to win two large dapps: Curve and Aave.

Optimistic rollups
In general, rollups are also sidechains that deploy new technical frameworks to scale and process transactions.

They bundle transactions on their chain (called “rollups”) and send them back to Ether L2 in a bundled state (called proofs, or more precisely SNARK) – exposing only the most important information.

Vitalik Buterin is a big proponent of rollups, and his blog post is “A rollup-centric roadmap for Ether”.

Optimistic rollups are a type of rollup that allows compatibility with the Ether Virtual Machine (EVM), meaning that smart contracts deployed on Ether can be redeployed on L2 with relatively few additional technical enhancements.

They are called “optimistic” rollups because they assume that the proofs provided for each transaction batch are valid.

Every 1-2 weeks, anyone can challenge the evidence submitted and claim they are fraudulent. As a result, Optimistic rollups have a long uptime to ensure that fraud is detected before the batch is submitted to Ether.

Optimism and Arbitrum are the two leading Optimistic rollup solutions – the former is integrated by two leading dapps :Uniswap and Synthetix.

ZK rollup
Zero-knowledge rollup (ZK rollup) differs from Optimistic rollup in that it does not have long on-/off-ramp times.

Instead, these proofs cryptographically ensure that transactions are valid from the beginning by using zero-knowledge proofs – thus eliminating the need for interrogation periods to detect fraud.

In addition, ZK rollups are faster and more efficient than Optimistic rollups – zkSync’s zkPorter promises to handle 20K+ TPS, even faster than a centralized network like Visa.

ZK rollup has long been considered a compromise to Optimistic rollup because the former does not support EVM compatibility – so there is a tradeoff for speed while simplifying smart contract deployment. However, zkSync 2.0 promises EVM compatibility and will be piloted this August.

If you don't add a layer2 recently, how can you say you know blockchain with others?

The winner of the L2 war must meet two conditions :

The technology they use (e.g., subchains, Optimistic rollups, ZK rollups) will solve the user problem that is currently prevalent in Ether L1

dapps and users of the platform create a network effect

In the first condition, there are various trade-offs for each L2 technology – be it EVM compatibility, longer uptime, transaction throughput, etc.

The most important question for current DeFi users when considering L2 is : Is it cheap to use ? Can I get in and out of L2 easily and quickly? Are my favorite dapps there? Is there enough mobility? Can I also do interesting Defi stuff / interoperability with other L2s that can be combined?

The second condition may be a function of the first one. For example, more dapps may choose to integrate with L2 with full EVM compatibility – meaning it is a simple deployment of existing L1 smart contracts to the L2 network.

The second condition means that they need to invest a lot of effort in acquiring users : both from a product growth perspective, but also from a partnership and marketing perspective.

A large number of dapps means a large number of users. A good mobility mining program means having a lot of users. Given the current friction of moving money to L2, users will stay glued to their L2 solution (at least for now).

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/if-you-dont-add-a-layer2-recently-how-can-you-say-you-know-blockchain-with-others/
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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