As with traditional computer networks, each blockchain protocol has a different capacity tolerance. There isn’t much traffic they can take before they get crowded. Similarly, this traffic overload results in high transaction fees, especially for Ethereum, the largest smart contract platform.
The solution to this network congestion problem is simple. A Layer 2 network that connects to the Layer 1 chain, which is the core of Ethereum. These L2 scalability solutions act like roads that connect to the Ethereum highways, offloading traffic and enabling it to run smoothly and affordably. Here we will look at some of the most popular Ethereum L2 scaling solutions, commonly referred to as sidechains.
1. Polygon (MATIC)
So far, Polygon is Ethereum’s most widely adopted Layer 2 solution. Unlike Ethereum, which is limited to 13 to 17 transactions per second (TPS), Polygon can run up to 7,000 TPS, which is comparable to Visa.
As Proof of Stake (PoS) Network— Ethereum is about to migrate — Polygon relies on MATIC tokens to validate transactions. Therefore, the person holding the MATIC token becomes a validator of the network and can get a cut every time a transaction occurs. This process is called staking.
Similarly, MATIC holders can delegate the MATIC stash to a trusted validator to indirectly serve the same purpose. That’s why they are called delegators. In any case, staking MATIC will give you an annual rate (APR) of up to 9.5%. This is well above the national average of 0.06% offered by banks’ savings accounts. Polygon calculator It shows exactly how much you can earn with MATIC staking.
Today, Polygon offers nearly 900 decentralized applications (DApps), from lending, borrowing and blockchain games to NFT marketplaces and gambling. The more you use these DApps, the more valuable MATIC tokens will be as Polygon’s native cryptocurrency.
However, Polygon’s TVL (total value is locked) is well below Ethereum itself, at $ 4 billion. Nonetheless, those who want to avoid Ethereum’s high transaction fees are looking forward to significantly lowering gas prices.
So it’s been almost a week unless Polygon has partnered with another web3 company.Two of The most popular NFT marketplace, OpenSea and Rarible have already extended blockchain support to Polygon. This is great news for NFT traders.
Arbitrum has gained a lot of popularity in a very short period of time since its launch in May 2021. At this pace, the current TVL of $ 3.3 billion could even surpass Polygon. Interestingly, Offchain Labs, the founder of the company that developed Arbitrum, is none other than Ed Felton, former White House Deputy Chief Technology Officer.
Unlike Polygon, Arbitrum does not have its own token. Therefore, there is no staking mechanic. Instead, Arbitrum uses Ethereum’s mainchain to validate transactions. Because of this, Arbitrum’s gas charges are somewhat higher than Polygon, but significantly lower than Ethereum.
On the other hand, the fact that Arbitrum is protected by Ethereum means that Arbitrum reflects Ethereum’s decentralization with a much larger TVL pool. That said, Arbitrum is not yet suitable for investors who prefer to withdraw crypto assets. With the verification protocol, it takes two weeks to withdraw funds, but it only takes three hours to do the same with Polygon.
Still, Arbitrum has its own Arbitrum virtual machine, so much is expected. This is a framework that enhances smart contracts, similar to EVM (Ethereum Virtual Machine). It may seem like a problem at first glance, but it has the advantage of not relying on Ethereum for significant changes to the consensus protocol.
like that, Arbitram beats optimism in L2 races.. In addition, importing a DApp from AVM to EVM is a simple and automated process. That’s why Arbitrum has no problem attracting DApps every month. Arbitrum now offers all the major DApps you need.
3. Loop ring (LRC)
Loopring stands out from the L2 swarm using zero-knowledge (ZK) rollups. Rollup means that the L2 network scoops up Ethereum mainchain (L1) data and feeds it back in a compact format. Both Arbitrum and Optimism rely on optimistic rollups to achieve this. However, as the name implies, the optimistic rollup expects all network participants to act in good faith.
Loop rings take a different approach with ZK rollups. This means that the transaction is validated without going into the details of encryption and without revealing your identity to other parties. In the ZK approach, that type of rollup significantly reduces transaction volume, which also improves data throughput.
Another advantage of ZK is that it does not have a long challenge period due to the unique validity of the transaction. Therefore, the withdrawal time is faster than both polygons and arbitrums. Due to these advantages, Loopring also has its own betable token called LRC.
However, unlike more universal platforms like Hermez, Loopring focuses on providing cheap, ultra-fast ramps for payment DApps. Decentralized Exchange (DEX).. Still, Loopring is gaining in popularity as it offers up to 2,025 TPS, quick withdrawals, and one-hundredth of Ethereum’s gas rates.
Finally, Loopring is named after Ordering, its unique round-tripping system for DEX. Each order ring consists of up to 16 individual orders. In this way, the order does not have to be a direct match between the buyer and seller in order to be executed. The end result of this system is better market liquidity and price discovery.
4. Immutable X
Founded by young Australian brothers Robbie and James Ferguson, Immutable X has become a popular L2 network in the NFT marketplace. As the first sidechain dedicated to NFT trading, Immutable X does not charge gas charges and offers amazing transaction speeds of up to 9,000 TPS with instant confirmation.
For these reasons, Immutable X has recently built up a series of major partnerships. The iconic game retail chain GameStop will use the L2 protocol for future NFT marketplaces. Similarly, Immutable X powers TikTok’s TopMoments NFT. He also runs Illuvium, Planet Quest, Guild of Guardians, Gods Unchained, Highrise, GreenPark Sports and ESL Gaming in the field of blockchain games.
But how does Immutable X achieve this amazing performance at zero price and make it attractive?
In short, Immutable X has partnered with StarkWare, a company that specializes in upscaling blockchain without compromising security. Specifically, we have developed StarkEX, a rollup that proves its effectiveness, and StarkNet, a distributed ZK rollup without permission. Validity-based calibration means that crypto / NFT assets cannot be traded without the specific permission of the user.
At the same time, StarkNet bundles large batches of transactions on the Ethereum chain, rolls them off-chain using zero-knowledge proofs, and a single transaction at a set fee cost paid by ImmutableX. Feedback to Ethereum. , ImmutableX is simple and easy to access MetaMask wallet.. Therefore, users do not have to do anything special for the platform that integrates it.
Finally, for Ethereum traders looking to minimize simple transactions such as token transfers, there is xDai, also known as the Gnosis chain for an ongoing merger. This Layer 2 scalability network works the same as Immutable X, making NFT transactions very affordable.
Note that xDai is not only a decentralized sidechain, but also a stablecoin fixed to the US dollar. Thanks to the Proof of Stake consensus, users can bet xDai to protect their network in exchange for rewards each time another trader executes a transaction.
To explain the performance of xDai, I just remember how it became popular. In February 2019, ETH Denver, the world’s largest web3 hackathon, used xDai and a burner wallet to distribute 11 food trucks, or $ 3,8,000, 4,405 meals. The overall event cost was incredibly only 20 cents.
Similarly, xDai transactions take less than 5 seconds to complete compared to minutes in Ethereum. Thanks to this performance, xDai has partnered with various platforms such as SushiSwap, Unifty, Chainlink, CardStack, HOPR, Ankr and RampNetwork.
Will Layer 2 solutions remain relevant after the ETH 2.0 upgrade?
In conclusion, the L2 network is demonstrating its benefits under uncertain conditions. It provides users with a convenient way to avoid fast and exorbitant ETH gas charges while maintaining Ethereum blockchain security.
However, Ethereum will undergo a major overhaul in the coming months to become a complete proof of stake network. According to the Ethereum Foundation, this alone can reduce carbon dioxide emissions by 99%.
Nevertheless, that does not mean that Ethereum 2.0 makes the L2 network redundant. As the most popular smart contract blockchain, there is no amount of upgrades that can be performed to completely counteract traffic overload. This makes the L2 protocol symbiotic with Ethereum, but end users only need to have a mundane browser wallet like MetaMask to take advantage of them.
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