An overview of Layer 2 Scaling solutions on Ethereum

Introducing Ethereum’s Layer 2 Chains

You might have heard of Ethereum. It’s a blockchain platform that allows for the creation of decentralized applications. Ethereum is a great platform, but it has some limitations.

One of the limitations of Ethereum is that it can only process a limited number of transactions per second. This is where layer 2 solutions come into the picture. Layer 2 chains are secondary blockchains that run on top of Ethereum, allowing faster and more scalable transactions to occur.

Ethereum’s Layer 2 chains are a way to expand the functionality of the Ethereum network. These chains run in parallel to the main Ethereum chain and can be used to handle specific tasks. This allows the main Ethereum chain to remain lean and efficient, while the Layer 2 chains would be tasked to handle more complex operations.

There are 4 main implementations of layer 2 solutions: Sidechains, Optimisitc Rollups, ZK Rollups, and StateChannels.

Sidechains & Plasma chains

As aforementioned, sidechains are separate blockchains that run independently of and parallel to the Ethereum blockchain. As sidechains have separate consensus algorithms designed for efficient processing of transactions, it does not inherit ethereum’s security properties.

More importantly, they are connected to the Ethereum mainnet by a two-way, cross-chain bridges to allow the transfer of assets to and from the mainnet. An example would be the Polygon sidechain and its corresponding Polygon Bridge — allowing users to bridge Ethereum over to Polygon (which would show up as WETH, aka Wrapped Ether). The bridging process typically takes about 8 minutes to occur.

Optimistic Rollups

ZK Rollups

StateChannels

How Do Layer 2 Chains Work?

The way layer 2 chains work is that they’re essentially separate blockchains that run in parallel to the main Ethereum blockchain. They’re connected to the main blockchain via special bridges, which allow them to share data and transactions.

This allows for a lot of different benefits. For one, it makes the network faster and more scalable. Transactions can be processed on the layer 2 chain, and then only moved over to the main blockchain when they’re confirmed. This reduces the strain on the main blockchain, making it faster and more efficient.

It also allows for more complex transactions to be processed. Layer 2 chains can be used to handle things like smart contracts and decentralized applications, which are too heavy for the main blockchain to handle. This opens up a whole world of possibilities for Ethereum developers.

What Are the Benefits of Layer 2 Chains?

One of the benefits of layer 2 chains is that they can provide more scalability for businesses and organizations. In other words, they can help handle more transactions without clogging up the main Ethereum network.

This is because layer 2 chains are separate from the main Ethereum chain. They run on their own, independent of the main network. This also means that businesses and organizations don’t need to worry about clogging up the network with their transactions.

Another benefit of layer 2 chains is that they can help reduce costs. This is because businesses and organizations can use layer 2 chains to process transactions instead of the main Ethereum network, bringing down costs in the form of lower gas fees.

Future of Layer 2 Chains

What does the future hold for layer 2 chains? Layer 2 chains could help Ethereum scale to meet the demands of a truly global economy and enable the development of new applications that aren’t possible on Ethereum today.

Of course, all of this is still in the early stages, and there’s a lot of work to be done in terms of research, development, and testing. But the potential is there, and I’m excited to see what the future holds for layer 2 chains on Ethereum.

Layer 2 Chains vs Ethereum Killers

You might be wondering what the difference is between a layer 2 chain and an ethereum killer. Layer 2 chains aim to solve the scalability issues that are inherent in ethereum’s design, while ethereum killers are blockchain projects that aim to dethrone ethereum as the leading smart contract platform.

Layer 2 chains use various techniques to scale transactions, such as sharding, off-chain scaling solutions, and side chains. Ethereum killers, on the other hand, focus on improving upon Ethereum’s design in order to provide a better platform for developers.

Ethereum killers typically have their own mainnet and don’t rely on Ethereum’s infrastructure. This means that they can offer features that Ethereum cannot, such as more efficient consensus mechanisms and faster transaction times.

It’s important to note that layer 2 chains are not mutually exclusive with ethereum killers; in fact, many projects are working on both layer 2 solutions and their own mainnets. However, the distinction is worth bearing in mind when considering which projects to invest in.

FAQs About Layer 2 Chains

To wrap things up, let’s go over some frequently asked questions about layer 2 chains.

Q: What is a layer 2 chain?

A: A layer 2 chain is a blockchain that runs on top of another blockchain. The most common type of layer 2 chain is a sidechain.

Q: What are the benefits of using a layer 2 chain?

A: There are many benefits to using a layer 2 chain, including increased scalability, improved security, and reduced costs.

Q: How does Ethereum fit into the picture?

A: Ethereum is the most popular platform for launching and running layer 2 chains. This is because Ethereum has the largest developer community and the most robust tooling.

Q: What are some popular layer 2 chains?

A: Some popularlayer 2 chains include Plasma, Lightning Network, and Connext Network.

Conclusion

In short, layer 2 chains are incredibly important for the scalability of Ethereum. They offer a way to scale the Ethereum blockchain while maintaining the security of the main chain. By moving transactions off of the mainchain, these chains are able to handle a significantly higher volume of transactions. There are a variety of different layer 2 chains being developed, each with its own unique features and use cases. It’s important to keep an eye on the development of these chains, as they will play a major role in the future of Ethereum.