Title: The Rise of Layer 2 Solutions in Blockchain Technology
Author: Starknet; Translation: Blockchain Simplified
The blockchain technology continues to evolve, with Ethereum achieving a record-breaking 2 million daily transactions in January 2024. However, scalability issues between first-layer (L1) chains like Bitcoin and Ethereum still hinder their widespread adoption.
As a result, second-layer (L2) solutions have emerged: a series of technologies designed to accelerate transactions and reduce costs without compromising the security and decentralization of leading L1 networks. According to data from L2Beat, L2 scaling solutions have transformed Ethereum, processing transactions at a rate 11-12 times higher than Ethereum itself.
This article delves into the L2 ecosystem, including its key innovations, challenges, and future directions.
1. Origin of L2:
As more users transact on L1, these networks become slower and more expensive. Resolving scalability issues on L1 often involves compromising between security or decentralization, both essential features for all blockchain networks. This trade-off, known as the “blockchain trilemma,” forces a choice between scalability, decentralization, and security.
Addressing the blockchain trilemma is crucial for Ethereum, the preferred L1 for building decentralized applications (dApps). Among these three desired features, Ethereum prioritizes security and decentralization at the expense of scalability.
To expand the use cases and types of dApps on Ethereum, building more complex dApps must be economically feasible. L2 solutions emerged as a way to address these challenges by moving most of the heavy transaction-related computations from the base layer to the second layer, increasing transaction throughput, reducing costs, and enhancing user experience while maintaining the security and decentralization of the underlying L1 blockchain.
2. Core Technologies and Frameworks:
With the total value locked (TVL) in the L2 ecosystem surpassing $460 billion, it encompasses various technologies and frameworks with unique characteristics. Let’s delve into some of the most important technologies:
– Rollups: There are two types of Rollups – Optimistic Rollups and Validity/Zero Knowledge Rollups. Optimistic Rollups assume transactions are valid by default and allow network participants to challenge suspected fraudulent transactions using “fraud proofs.” Validity Rollups use “validity proofs” to verify the validity of each transaction submitted to the base layer. Compared to L1, both types of Rollups offer higher throughput and lower costs.
– State Channels: State channels enable participants to conduct off-chain transactions by locking a portion of the blockchain state in a multi-signature contract. Participants can freely transact off-chain, with the final state settled on-chain. State channels provide near-real-time transactions and low fees but have limitations in functionality and participant numbers.
– Plasma: Plasma is a framework for creating layer 2 sidechains anchored to the main chain. Plasma chains process transactions off-chain and only submit periodic updates to the main chain, relieving the burden on the L1 network. Similar to Optimistic Rollups, Plasma chains use fraud proofs to challenge suspicious transactions.
3. Examining the L2 Ecosystem:
The L2 ecosystem is rapidly evolving, with numerous projects and initiatives striving to expand major L1 blockchains. While some solutions focus on bringing scalability to Bitcoin, such as the Lightning Network, which uses state channels to enable faster and cheaper transactions on the network, a universal computation L2 solution has yet to emerge on Bitcoin.
In contrast, Ethereum has nurtured a thriving L2 solution ecosystem. We will spotlight key participants and briefly describe them:
– Validity Rollups (also known as Zero Knowledge Rollups):
– Starknet: A Validity Rollup with the fastest-growing developer community, featuring native account abstractions and its programming language (Cairo) to optimize the use of validity proofs.
– zkSync: Another leading Validity Rollup with native account abstractions running on the Ethereum Virtual Machine (EVM).
– Scroll: A Validity Rollup compatible with EVM, focusing on native compatibility with existing Ethereum dApps and tools.
– Polygon zkEVM: Developed by the L2 scaling veteran company Polygon, zkEVM is an EVM-compatible Validity Rollup.
– Linea: Supported by the company behind MetaMask, Consensys, Linea is a Validity Rollup that can be directly used through MetaMask.
– Optimistic Rollups:
– Arbitrum: The largest Optimistic Rollup measured by TVL, compatible with EVM.
– Optimism: The second-largest Optimistic Rollup measured by TVL, EVM compatible.
– Base: The third-largest Optimistic Rollup measured by TVL, EVM compatible.
Many of these projects are still in their early stages, often involving a period of centralized control known as the “bootstrapping phase,” allowing controlled system updates and bug fixes. While initially necessary, these bootstrapping phases should eventually be removed to achieve the expected decentralization and trustless operations.
The adoption of L2 solutions is steadily growing across various sectors, including decentralized finance (DeFi), non-fungible tokens (NFTs), and blockchain games. The most commonly used L2 types are often Optimistic Rollups and Validity Rollups. However, integrating L2 solutions is not without its challenges.
4. Challenges and Solutions:
While L2 solutions hold tremendous potential, they still need to overcome some challenges to realize their full potential. From a user perspective, interacting with L2 networks may be slightly more complex, requiring additional steps like bridging assets and managing multiple wallets. Improving user experience by better integrating wallets, simplifying onboarding processes, and providing more intuitive interfaces will be crucial in driving mainstream adoption.
This is why Starknet offers built-in account abstraction functionality to achieve a smoother user experience, such as transaction signing through facial recognition and fingerprint recognition (e.g., the Braavos wallet offers both features). On Starknet, expanding Ethereum means that Web2-style user experiences are as important as cheaper and faster transactions.
5. Future Outlook for L2:
As the L2 ecosystem matures, we can expect a wave of innovation, such as native account abstraction on Starknet. Hybrid solutions combining the advantages of different L2 technologies have begun to emerge, providing dual benefits for Optimistic Rollups and Validity Rollups. Advancements in validity proofs (like STARKs) further enhance the scalability and privacy of L2 networks.
Looking ahead, the future of L2 solutions is closely intertwined with the overall development of blockchain technology. As L1 networks evolve and new consensus mechanisms like Proof of Stake gain traction, L2 solutions will need to adapt and seamlessly integrate with these changes.
In the coming years, we will witness a flourishing development of customized L2 solutions tailored for specific use cases and application areas. Some predict that L2 networks will eventually become the primary layer for user interactions, with L1 serving as a secure settlement layer. Others envision a multi-layered blockchain architecture where L2 solutions evolve in parallel, sometimes with a third layer (L3) above them to create a scalable and interoperable ecosystem.
6. Conclusion:
As the L2 ecosystem continues to evolve, collaboration and contributions between developers, researchers, and users are crucial in developing robust and user-friendly L2 solutions.
By harnessing the potential of L2 technology, the blockchain community can overcome the limitations of L1 networks and unlock new possibilities for decentralized applications. The road ahead is filled with challenges and opportunities, but with the right approach and a shared vision, we can build a scalable and inclusive blockchain ecosystem that empowers individuals and transforms industries.
