The battle among the crowds in the Ethereum Layer 2 era

In the DeFi world, those who have liquidity have the world, and the same is true for Layer 2 track.

Expansion is an enduring topic in the crypto world, and Ethereum is no exception. When the Ethereum ecosystem is booming, the problem of high handling fees often accompanies it, so that users complain and miserable. Various technical solutions including state channels, side chains, and Plasma have been proposed and sparked intense discussion, but they have not been widely adopted by the community due to their respective problems. The birth of Rollup technology brought a glimmer of expectations to the Ethereum community and was recognized by Vitalik as an ideal new world. Projects based on Rollup technology are emerging in an endless stream. New projects such as Optimism, zkSync, Arbitrum have emerged, and some are unwilling to lag behind by transforming from side chain projects to increase support for Rollup Polygon (Matic), hoping to seize a market in the Layer 2 sector and become Layer 2 overlord.

If the summer of 2020 is DeFi Summer, then 2021 is likely to be Layer 2 Summer. As Optimism is ready to go online, the competition among Layer 2 projects such as Optimism, zkSync, Arbitrum, and Polygon in the ecological layout has become increasingly fierce, and a new liquidity battle is about to start.

The zkSync that lurks the big move

Rollup is mainly divided into Optimistic Rollups and ZK Rollups. zkSync is the representative of ZK Rollups technology.

zkSync adopts SNARK or STARK zero-knowledge proof algorithm as the proof of validity, no fraud proof is required, the degree of decentralization is higher than other opponents, and the throughput and scalability are better. At the same time, zkSync can quickly withdraw assets from Layer 2 back to the Ethereum mainnet through complex mathematical proofs. Although Vatalik is optimistic about the technology of zkSync in the long-term, it feels that the technology is relatively new and needs to be verified, and it is difficult to implement it in the short-term.

At present, zkSync cannot be applied to major DeFi projects. It can only directly support simple operations such as transactions and transfers, so it can only be deployed on certain specific applications. For example, the open source software and community donation platform Gitcoin supports users to donate through zkSync, and the decentralized storage network Storj also integrates the zkSync solution to accept payments. If other types of DeFi are to be migrated to zkSync, the contract code needs to be modified. For this reason, the development team MatterLabs also introduced the Zinc programming language with the same structure as Solidity, hoping to allow developers to easily modify the contract code. In October 2020, the zkSync development team MatterLabs launched the first zkSync two-layer smart contract testnet to support Curve. Curve’s contract on Ethereum was rewritten in the Zinc programming language.

The World of Coins-The Contest in the Era of Ethereum Layer 2

Decentralization and security are the biggest selling points of zkSync, but the incompatibility with EVM is the biggest obstacle for zkSync to compete for liquidity. There is no doubt that zkSync is also aware of this problem. In June 2021, zkSync 2.0 will be launched on the test network, which supports some opcodes and some is compatible with EVM. It is reported that the zkSync 2.0 main network will be launched in August.

zkSync is like a sleeping giant with unique advantages, but only when the problem of EVM compatibility is really solved can the flying dragon be in the sky.

Optimism ?

Optimism belongs to the representative project of the Optimistic Rollup school. Compared with zkSync, the advantage of Optimism is that it is compatible with EVM, and developers can quickly migrate code without requiring more code changes, which is friendly to developers. At the same time, Optimism also directly uses Ethereum’s existing infrastructure, including wallets and other tools that can be seamlessly linked. But its problem is that the withdrawal wait time is long, it may take up to a week to withdraw to the Ethereum main network, and the network throughput is more limited than other solutions.

As a star project focusing on implementing Ethereum expansion solutions, Optimism has received support from DeFi giants early on. In September 2020, Optimism launched its test network. DeFi giants such as Synthetix, Uniswap, Chainlink, etc. are all early testers, and they are all in the limelight. However, the Optimism mainnet has not been able to land for a long time. Although the project started the soft start of the mainnet in January 2021, the official launch of the mainnet was postponed from the originally planned March 21st to July. The project party explained that the main network was delayed because it did not consider the schedule and requirements of the partners, and the community was insufficiently prepared. One reason behind this is that although the OVM launched by Optimism is compatible with EVM, it is not 100% compatible. Min Dao, the founder of dForce, even stated that this is a major strategic mistake of Optimism.

The World of Coins-The Contest in the Era of Ethereum Layer 2

If the main network in July is postponed again, I wonder if Optimism can continue to be optimistic?

Arbitrum for overtaking in corners?

Arbitrum also belongs to Optimistic Rollup. Compared with Optimism, Arbitrum is more compatible with EVM. Compared with other Rollup solutions, the design highlight of Arbitrum is that the amount of data on the chain is quite low, it can support any EVM smart contract, and it can be used with all Ethereum developer tools. Arbitrum has no restrictions on the types of contracts written, and does not require developers to rewrite applications using unfamiliar abstraction or programming languages. Arbitrum has complete smart contract support and a Solidity compiler. Developers can easily transplant existing contracts or develop new contracts.

Like the Optimistic Rollup-based project, it takes up to a week to withdraw from Arbitrum to Ethereum. In order to solve this problem, Arbitrum proposes to use the interchangeability of assets to avoid confirmation delays by means of “fast withdrawal”. When withdrawing ETH or ERC20 tokens on the Arbiturm chain, users who hold funds on Arbitrum only need to pay some untrusted third parties to exchange these funds directly on L1, which is a bit similar to the “in-site of a centralized exchange” “Transfer” function. In May 2021, a centralized exchange announced that it would support Arbitrum’s direct deposit and withdrawal. In this way, users can quickly withdraw assets from Arbitrum back to Ethereum.

Facing the fierce competition on the Layer 2 track, it was initially shown that there were not many DeFi leaders supporting Arbitrum, but Arbitrum did not work behind closed doors, but continued to attract new partners step by step. It started to lay out the Layer 2 DeFi ecosystem based on Arbitrum Rollup very early, including In addition to various infrastructures such as wallets, in the testnet stage, projects from various DeFi tracks have been invited to participate in the deployment of its testnet. In November 2020, the Offchain Labs team used Uniswap’s open source code to build Arbiswap, which is similar in function to UniSwap. In January 2020, Arbitrum released the Demo product Arbitrum Rollout. The first batch of projects were mostly second-tier DeFi projects, but they fully demonstrated its comprehensive DeFi ecological potential. At the end of May, Arbitrum’s development and test network was launched, marking the last step from the landing. This time, more than 250 teams have applied for access to the developer testnet, and even UniSwap V3 and SushiSwap have also begun to express their support and have deployed contracts to Arbitrum.

Compared with Optimism, Arbitrum, which is halfway through Cheng Yaojin, is more fully prepared. It seems to be higher than Optimisim in the strategic layout. As long as Arbitrum is open to all users, users can truly experience the entire DeFi ecosystem based on Arbitrum.

Polygon renovated by the old forces

The Layer 2 track is in full swing, and Polygon, a former star expansion project, hopes to get a share. Polygon’s predecessor was Matic. In 2017, Matic appeared as the star project of the Ethereum side chain, trying to develop a PoS-based side chain and exploring the popular new expansion technology Plasma at that time. However, the sidechain technology uses independent validator nodes and regards Ethereum as the settlement layer. Without sharing the security of Ethereum, malicious validators cannot be prevented from doing evil. Plasma has security and data availability problems that are difficult to solve, so Matic has slowly dimmed from the previous generation of expansion star projects.

Polygon took advantage of the time window before Optimism and Arbitrum went online, and took the lead to seize the market. In February 2021, the Matic brand was upgraded to Polygon, announcing that it plans to add support for Optimistic Rollup, zkRollup, Validium and other Rollup technologies based on the original sidechain and Plasma technology to become a Layer 2 aggregator. Although strictly speaking, Polygon’s current technology has not yet implemented Layer 2, but it is one of the few ready-made solutions in the market that are compatible with Ethereum.

In April 2021, the decentralized lending leader Aave announced the deployment of Polygon, the expansion of the Ethereum side chain, and Polygon announced that it would provide liquidity mining rewards for Aave of its network, and reserved 1 of the total supply of tokens MATIC. % (About 40 million U.S. dollars)

Aave has become the highest TVL project on Polygon, with about 2 billion U.S. dollars, which is 1/3 of Aave’s TVL in Ethereum. Also in April, it was announced that Curve, which had been cooperating with zkSync, also launched support for Polygon. The current TVL exceeds 500 million U.S. dollars. In addition to wooing giants, Polygon’s ecology is also showing a trend of blooming, including projects such as QuickSwap with more than 17,000 users in 24 hours, which once attracted a high degree of market enthusiasm.

The World of Coins-The Contest in the Era of Ethereum Layer 2

in conclusion

In the DeFi world, those who have liquidity win the world, and the same is true for the Layer 2 track.

For liquidity, on the one hand, zkSync distinguishes itself from other opponents by its security and decentralization, hoping to attract DeFi projects, the team even personally wrote a contract based on the zkSync network for Curve; on the other hand, zkSync tries to be more compatible with Ethereum EVM reduces the difficulty of rewriting contract code to be more friendly to Ethereum developers. Optimism wooed several DeFi giants to join its testnet early, but was caught up by Arbitrum halfway because of the delay in going online. It successfully made Uniswap and SushiSwap also deployed on the Arbitrum testnet. The Arbitrum testnet also brings together a large number of second-tier DeFi projects or its native ecological projects. Once the Arbitrum mainnet is online, it can quickly and seamlessly connect to the entire Ethereum ecosystem. Polygon seized the market for Layer 2 projects that were not yet available in the market, and attracted DeFi projects including Aave, Curve, and SushiSwap in the form of side chains, and became another popular public chain after Ethereum and BSC, and took the lead. But perhaps in the near future, the launch of Arbitrum and Optimism will threaten Polygon’s ecology. There is still a long time before this Layer 2 battle will be determined.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-battle-among-the-crowds-in-the-ethereum-layer-2-era/
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