Layer 2 solutions are networks or technologies that run on top of the decentralized primary ledger. They boost the reliability and robustness of transactions while keeping the same safety and decentralization attributes of the mainnet. The key advantages of layer 2 solutions are raising the transaction speed and reducing gas fees. Famous examples of layer 2 solutions include Polygon, Polkadot, and layer 2 lightning network. Here, we explore the critical layer 2 scaling solutions you should consider.
Why are Layer 2 solutions crucial?
An add-on framework developed on the spine of an existing blockchain network is called Layer-2. The objective of this additional network is to address the issues of the crypto network’s settlement speed and scalability problems. The inability of Bitcoin and Ethereum to execute numerous transactions per second (throughput) impairs their long-term expansion. So, an enhanced throughput is needed to help these networks handle large-scale transactions.
Furthermore, crypto layer 2 solutions address carbon emission issues by reducing the gas fees associated with layer 1 solutions.
The Ethereum mainnet is a widely used blockchain because of its security. However, the network has its fair share of weaknesses, notably high gas fees and slow settlements. The layer 2 scaling solutions developed on Ethereum mainet maintain the security of transactions, enhance speed, and boost scalability.
What are layer 1 solutions?
Layer 1 solutions come first, and it’s essential to understand what they entail before delving into Layer 2 solutions. A layer 1 network is a base blockchain, such as Ethereum, BNB Chain, and Litecoin. They are called layer one because they’re the main networks within their environments.
Layer-1 protocols alter the rules of the network by expanding settlement capability and speed. They also accommodate many users and carry more information. Here are some examples of layer 1 solutions:
- Ethereum shifting to a Proof-of-Stake consensus mechanism
- Sharding: a type of database partitioning that simplifies the work of authenticating and validating settlements.
- Expanding block size means more transaction processing per block.
Types of layer 2 solutions
Layer 2 solutions accelerate throughput without interfering with original decentralization and safety attributes. An essential quality of Layer 2 scaling is that they must inherit the fundamental safety of the main chain. There are two main layer 2 solutions: Zero-knowledge rollups and optimistic rollups.
They are also known as ZK-Rollups. They comprise information packages secured by a digital contract on the base blockchain when transported off-chain for dispensation. They deliver a block within a minute and can process 2000 TPS. Zero-knowledge here implies that verifiers understand that they have the same information without any need for revelation.
The ZK-rollup is more robust in performance than layer 1 because of its off-chain high information loading. These solutions do away with the need to ask for essential information about the digital agreements, saving vast amounts of processing energy. As a result, a minimal gas fee is required, and settlements happen promptly.
Optimism layer 2 operates on the Ethereum network and enables massive amounts of digital agreements to run without overstretching the network. They enjoy the same levels of safety as Ethereum mainet. Compared to Plasma and ZK-rollup, optimism layer 2 provides minimal throughput.
Plasma layer 2 solution applies child that helps Ethereum’s mainnet in transaction confirmation.
Bitcoin Layer 2 solutions
Bitcoin’s layer 2 lightning network is one of the best scaling solutions. The solution picks settlement packages from the base chain to be processed off-chain before transporting the data. The layer 2 lightning network introduces virtual agreements to Bitcoin, which is a big positive step. Here are the key benefits of this scaling solution:
- Prompt payment
- Minimal expense
- Cross blockchain swaps
Ethereum Layer 2 solutions
Here are the main crypto layer 2 solutions or Ethereum:
- Polygon layer 2: layer 2 polygon is an interoperable decentralized scaling solution for creating interlinked Ethereum agreeable blockchain networks. Polygon layer 2 is designed to overcome various downsides of the base blockchain, such as high gas fees, minimal safety, and limited scalability. Layer 2 polygon uses multiple technologies, such as POS Chain and ZK-rollups to achieve its objectives.
- ZKSync: This crypto layer 2 is live on the network and offers low transaction fees. It’s a Zero-Knowledge rollup solution financed by Union Square Ventures (USV).
- Optimism Network: The main focus of Optimism is the scalability of the network. Andreessen Horowitz has funded the project’s development.
- SKALE Network: SKALE is one of the crypto layer 2 solutions for the Ethereum blockchain. It allows builders to side-step jamming on the Ethereum mainnet and transfer development from the main chain to a nearby SKALE-administered chain. SKALE allows dApp to launch in a trustworthy, highly scalable, and affordable ecosystem. This project uses a technology called elastic and has configurable chains. Blockchain software can lease SKALE shards due to their enhanced throughput.
- Starkware: This is a Zero-Knowledge Rollup solution that delivers scalability, safety, and confidentiality to developers. The network uses STARK-based legitimacy corroborations to provide a fast and unified user experience. A key perk of the solution is that it offers low gas fees for any transaction.
- Aztec: This is a Zero-Knowledge rollup product that delivers scalability and privacy to Ethereum’s base network. Its objective is to allow affordable transactions and bank-grade crypto transactions through zero-knowledge validities.
- Loopring: This ZK rollup-based solution offers enhanced security and low transaction fees. It’s a layer 2 solution for decentralized exchanges (DEXs) that processes numerous transactions of TPS.
- POA Network: It’s an open-source Ethereum sidechain with high levels of interoperability. Its objective is to develop bridges between various digital agreement platforms. The solution applies a proof of Authority consensus mechanism and requires validators to undergo a KYC process.
In the coming days, Layer 2 scaling solutions will set the pace in the blockchain industry. Interest in this sector has gone up due to innovative products, like Metaverse, gaming, and NFTs. As the demand for these products soars, scalability becomes a focal point. And this is how Layer 2 scaling solutions come in handy. These solutions are designed to overcome the issues of scalability and speed associated with both Bitcoin and Ethereum. They run on top of the leading blockchain and enhance transaction speed and scalability. Here, we’ve explored some of the Layer 2 solutions in the market available for Bitcoin and Ethereum networks.