What Does Layer 2 Blockchain Mean for the Future of Crypto

Why Layer 2 is Important for Blockchain’s Future

Which Solutions Are Running Right Now?

  • Optimism: Optimism is a solution that allows users to dramatically reduce the cost and latency of their Ethereum-based transactions by using a technology known as optimistic rollups to run the computational data associated with each transaction on a second layer. Dozens of major DApps have already deployed on Optimism, including the likes of Synthetix, Uniswap, 1inch, The Graph, and more.
  • Arbitrum: Arbitrum is another second-layer solution that leverages optimistic rollups to reduce the computational load on the Ethereum network — resulting in higher throughput, as well as lower fees and latency. Transactions completed on Arbitrum are logged on Ethereum and secured by its node network. Arbitrum is unusual among layer-2 solutions in that it natively works with all EVM languages and tooling with no special adapters required.
  • Plonky2: Formerly known as Matic Network, Polygon recently announced the launch of its own layer-2 solution, known simply as “Plonky2”. The platform leverages a technology known as recursive SNARKs to operate up to 100x faster than similar layer-2 solutions while keeping the verification cost on Ethereum incredibly low. The solution is currently operational, but due to its recentness, no apps have yet integrated it.
  • xDAI: xDAI is a dedicated sidechain designed to help offload some of Ethereum’s transaction load onto a faster, more efficient partner network that leverages Proof-of-Stake (POS) to achieve a high throughput and 5-second block times. It also provides a bridge, allowing users to easily move their assets between Ethereum and xDAI. Depending on your view of what constitutes a layer-2 solution, xDAI (and several other blockchains including Polygon) since it has its own network of nodes and can operate independently of the layer-1 chain (in this case, Ethereum).
  • Metis: The recently launched Metis Andromeda network is a layer-2 scaling solution that leverages Optimistic Rollups to make transacting on Ethereum faster and cheaper. As an open protocol, any developer or team is able to quickly and easily deploy their project on Metis’ EVM equivalent solution — helping them and their users benefit from dramatically improved gas efficiency and scalability.

How Do Different Second Layers Work?

  • Rollups (e.g. optimistic and zk-rollups): These work by aggregating a batch of transactions off-chain (including their computational and storage data) in a smart contract, before posting a small receipt of this work to the main chain to achieve finality.
  • Nested blockchain: As its name suggests, a nested blockchain is essentially a blockchain operating within or on top of another blockchain. These multi-level blockchains can use a variety of child blockchains to process general or specialized tasks before returning the results to the parent layer.
  • Sidechains: These are accessory blockchains that are used to improve or augment the functionality of an associated main blockchain. These typically have their own consensus system and security network and communicate with the mainnet via a two-way bridge.
  • State Channels: State channels are used to provide two-way communication between a blockchain and an external network. These allow users to complete an arbitrary number of state updates on an external network before recording the final state of these transactions to an underlying blockchain. For example, two users could play a game of chess, with each move being represented as a transaction passed through the state channels, whereas the final outcome of the game (i.e. the winner) is recorded on the blockchain).

Bitcoin Layer-2 Solutions

The Future of Layer-2

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