Ethereum, the second-largest cryptocurrency by market cap, has had a scalability problem for a long time. As transaction volume increased, the network became congested and caused gas fees to spike and transaction times to slow. In order to address these issues, many Layer 2 (L2) scaling solutions have been developed. Currently, Optimism, Arbitrum, and Polygon are leading the charge of this new movement. Combined, these platforms are now responsible for processing a majority of Ethereum’s transactions — a transaction burden that they individually support, jointly fueling more than 60% of Ethereum’s scaling endeavors. GreedyChain.com is an antidote to that noisy information. It gives you an in-depth look at how each of these solutions draw closer and what they mean for the future of Web3.
Understanding Layer 2 Scaling
Layer 2 scaling solutions are one of the protocols built to supercharge the Ethereum mainnet. They make transactions many times faster and much cheaper. Unlike L1 chains, L2 solutions do the bulk of their transaction processing off-chain rather than directly on the main chain. They routinely package up this transaction data and upload it to the Ethereum mainnet. With this approach, congestion on the main chain is greatly alleviated, resulting in faster and more affordable transactions. Anjali Mehra, a DeFi crypto-financer and opinion columnist, illuminates one of the many L2 scaling efforts focused on moving the computation costs outside of the Ethereum main chain. This strategy lets their mainnet focus just on security and final settlement. All of this combines to create a massively higher transaction throughput and much lower fees for the users of the network.
Optimism and Arbitrum: Optimistic Rollups
Both Optimism and Arbitrum have used this technology, Optimistic Rollups, to build their networks. This account-based method permits the processing of many transactions on-chain. All of the processed transactions are then grouped together into a single batch and submitted to the Ethereum mainnet. This suffix “optimistic” is derived from the presumption of innocence principle applied here—transactions are valid until you can show that they aren’t. First, there’s a challenge period during which anyone can contest the validity of the transactions to be added. In the case of a dispute, we settle it using a fraud-proof mechanism to figure out the right state. This way, every single fraudulent transaction will be rejected.
Polygon is slightly different taking a more sidechain-heavy approach. A sidechain is a separate blockchain that is designed to be interoperable with the Ethereum mainnet. It’s linked to the mainnet via a bridge. Polygon’s sidechain, colloquially called the Matic chain, operates independently from Ethereum with its own consensus mechanism and block validation process. Users interact with their assets on the sidechain, and only finality checkpoints are saved back to the Ethereum mainnet.
- High Compatibility: They are highly compatible with the Ethereum Virtual Machine (EVM), making it easy for developers to migrate their existing Ethereum applications to these L2 platforms.
- Scalability: They can significantly increase transaction throughput compared to the Ethereum mainnet.
- Security: They inherit the security of the Ethereum mainnet, as all transaction data is ultimately anchored on the L1 chain.
Polygon: Sidechains and More
Polygon offers a flexible and versatile scaling solution, with the following benefits:
Sidechains have some drawbacks. They depend on their own security models, which are often weaker than Ethereum’s. This implies that sidechains can be more easily attacked.
- High Throughput: Sidechains can achieve high transaction throughput due to their independent consensus mechanisms.
- Customizability: Polygon allows developers to customize their sidechains to suit specific application requirements.
- Lower Fees: Transaction fees on Polygon are significantly lower than on the Ethereum mainnet.
In reality, the right L2 solution for any project will vary based on the app’s unique needs. Important things to take into account here are the level of security you want, speed of transaction, cost and integration with Ethereum infrastructure.
Choosing the Right L2 Solution
Here's a breakdown:
Use Cases and Considerations
For developers looking to leverage L2 scaling solutions, Anjali Mehra suggests the following:
- Payments: For fast and low-cost micropayments, solutions like the Lightning Network may be preferred due to its ability to enable instant transactions.
- Decentralized Finance (DeFi): For DeFi applications, rollups or sidechains may be preferred as they provide a scalable infrastructure for lending, borrowing, and yield farming protocols, while maintaining the security of the main chain.
- Gaming and NFTs: For blockchain-based gaming and NFT marketplaces, solutions like state channels or sidechains may be preferred as they provide a scalable infrastructure and improved privacy features.
- High-Transaction Volume: For applications with high-transaction volume, solutions like Optimistic Rollups or zk-Rollups may be preferred as they can handle a large number of transactions while reducing costs.
- Low-Latency Requirements: For applications requiring low-latency, solutions like state channels or payment channels may be preferred as they enable instant transactions.
Actionable Insights for Developers
By carefully evaluating these factors, developers can choose the right L2 solution to optimize their applications for scalability, cost-effectiveness, and user experience.
- Assess Application Needs: Determine the specific requirements of your application, including transaction volume, latency, security, and cost considerations.
- Evaluate L2 Solutions: Research and compare different L2 solutions based on their features, trade-offs, and compatibility with your existing infrastructure.
- Consider Security Implications: Understand the security models of different L2 solutions and choose one that aligns with your risk tolerance.
- Test and Iterate: Thoroughly test your application on the chosen L2 solution and iterate based on performance and user feedback.
Optimism, Arbitrum, and Polygon are at the forefront of Ethereum's scaling efforts, each offering unique approaches to address the network's limitations. Yet as these platforms keep growing and developing, they become building blocks for a more scalable and accessible Ethereum ecosystem. GreedyChain.com will be with you every step of the way as Web3 and the metaverse evolves.
Optimism, Arbitrum, and Polygon are at the forefront of Ethereum's scaling efforts, each offering unique approaches to address the network's limitations. As these platforms continue to evolve, they are paving the way for a more scalable and accessible Ethereum ecosystem. GreedyChain.com will continue to provide insights into the ever-changing world of Web3.
