Ethereum Layer 2 Solutions and Their Impact on Scalability

Being one of the pioneers and major tokens, Ethereum has introduced concepts like NFT, smart contracts etc. These innovations have led to several real-world applications and enhanced scalability. This opened a plethora of opportunities for crypto technology.

Ethereum changed the landscape of crypto usability and scalability. It is one of the most popular and widely used blockchains in Decentralised Applications (dApps). With the rise in usage and scalability, the requirements to eliminate the limitations arose as well. There are various  Layer 2 (L2) solutions created for this purpose. Let us deep dive into them and understand their purpose and techniques involved.

Ethereum Layer 2 Solutions

There are several Layer 2 (L2) solutions created over the Ethereum Layer 1 (L1) blockchain to ease the traffic, enhance scalability, and increase the speed of transactions and efficiency. These solutions process transactions off-chain or utilise sidechains while preserving the security and trust of the main Ethereum blockchain. By operating on a separate layer, these scaling solutions enable faster and more cost-effective transactions without directly affecting the base layer’s performance or decentralisation. This approach allows the Ethereum network to handle a higher volume of transactions without compromising its core principles of security and trust. Let us go through them-

1. State channels: State channels facilitate off-chain transactions between parties, with only the final transaction state being recorded on the Ethereum blockchain. By shifting the majority of transactions off the main chain, state channels alleviate network congestion and enhance scalability, allowing for more efficient and cost-effective interactions within the Ethereum ecosystem.
2. Plasma: Plasma is a framework enabling the establishment of sidechains linked to the Ethereum main chain. These sidechains can process a large number of transactions and intermittently update their state on the main chain, enhancing scalability while upholding the security features of the Ethereum network.
3. Rollups: Rollups are layer-two solutions that consolidate multiple transactions into a single transaction, which is then submitted to the Ethereum main chain. This approach includes two variants: optimistic rollups and zk-rollups. Optimistic rollups presume transactions are valid by default, allowing for challenges if any invalid transactions are identified. Zk-rollups employ zero-knowledge proofs to verify the correctness of the bundled transactions, thereby enhancing scalability while maintaining high-security standards.

Benefits of Layer 2 solutions

Scalability and Transaction Throughput: L2 scalability solutions target boosting the network’s transaction capacity to handle a greater number of transactions in a set timeframe. This is essential for meeting the needs of an expanding user community and sustaining decentralised applications (DApps) that depend on swift and dependable transaction execution.

User Experience: Enhanced scalability directly improves the user experience on the Ethereum network. By mitigating congestion and transaction delays, users benefit from quicker confirmation times and reduced fees. This is especially crucial for applications like decentralised finance (DeFi), gaming, and decentralised exchanges, where speed and cost-effectiveness are essential for user satisfaction and widespread adoption.

Lower Transaction Fees: Ethereum scaling solutions have the potential to address the issue of high transaction fees, which has been a major concern during times of network congestion. By reducing the fees, these solutions make it more feasible for users to engage with the Ethereum network, thereby promoting a broader range of applications and use cases.

Network Sustainability: Ethereum scaling solutions are crucial for safeguarding the network’s long-term viability. Without effective scaling mechanisms, the Ethereum blockchain risks being overwhelmed by the growing demand, leading to network congestion, escalating fees, and slower transaction processing times.

Scalable Decentralised Applications: Ethereum scaling solutions facilitate the creation of scalable decentralised applications (DApps). DApps on Ethereum frequently encounter scalability hurdles stemming from the constraints of the base blockchain. By implementing efficient scaling solutions, DApps can accommodate a broader user base, manage increased transaction volumes, and deliver a smooth user experience. This fosters innovation, growth, and wider acceptance of decentralised applications across diverse sectors.

Top 10 Layer 2 Ethereum Scaling Solutions

Polygon: Polygon (MATIC) is a decentralised Ethereum scaling platform that combines the strengths of Ethereum and sovereign blockchains into a comprehensive multi-chain system. Polygon offers a variety of scaling solutions, including sidechains, plasma chains, and optimistic rollups.

Optimism: Optimism is a Layer 2 scaling solution that utilises optimistic rollups to enhance the throughput of the Ethereum network. Optimistic rollups enable transactions to be processed off-chain and then submitted to the Ethereum mainchain for verification.

Arbitrum: Arbitrum is another Layer 2 scaling solution that employs optimistic rollups. Arbitrum is developed by Off-chain Labs, a team of renowned researchers, engineers, and Ethereum enthusiasts.

Starkware: It is a Layer 2 scaling solution that uses zk-rollups to increase the throughput of the Ethereum network. zk-rollups are a type of zero-knowledge proof that allows transactions to be verified without revealing the underlying data.

Loopring: Loopring is a Layer 2 scaling solution that leverages zk-rollups to power a decentralised exchange (DEX) on Ethereum. Loopring offers high throughput and low fees, making it a popular choice for traders.

Hermez: Hermez is a Layer 2 scaling solution that uses zk-rollups to power a decentralised exchange (DEX) on Ethereum. Hermez is similar to Loopring, but it provides a more user-friendly interface.

ZkSync: ZkSync is a Layer 2 scaling solution that employs zk-rollups to increase the throughput of the Ethereum network. It has the potential to offer high throughput and low fees.

Fuel: Fuel is a Layer 2 scaling solution that uses optimistic rollups to enhance the throughput of the Ethereum network. Fuel is still in development, but it has the potential to offer high throughput and low fees.

Metis Andromeda: Metis Andromeda is a Layer 2 scaling solution that utilises optimistic rollups to increase the throughput of the Ethereum network. Metis Andromeda is developed by the team behind the Metis project, which aims to create a decentralised ecosystem for building and deploying dApps.

Boba: Boba Network is a Layer 2 scaling solution that employs optimistic rollups to enhance the throughput of the Ethereum network. Boba Network is a fork of Optimism, but it offers some additional features, such as support for cross-chain transfers.

Read More: What are Blockchain Layers

How to Buy Ethereum and Related L2 Tokens

Various exchanges like Zebpay provide options to easily buy Ethereum and other tokens in India. Zebpay is one of India’s first crypto exchanges, custom-made and evolved to suit the needs of India. One of the notable and unique features of Zebpay is called “Cryptopacks”. It provides carefully curated bundles of related tokens. Both Ethereum and related tokens of L2 solutions are readily available for purchase.

Conclusion

Ethereum along with its L2 solutions have introduced a plethora of options in the crypto world. These L2 solutions make Ethereum stand at the forefront of scalability and real-world utilities. These solutions are changing the landscape of Web 3. We are not investment analysts. We recommend researching each token before investing in them.

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