Article by Alex Liu, Foresight News
The Solana community has long been a critic of Layer 2 solutions. But now, some Solana ecosystem projects are also building L2 solutions, leading to a dilemma for Solana supporters – should they continue to criticize or adjust their views? Is Solana becoming what it once despised?
Before making a judgment, let’s first understand if Solana’s Layer 2 is just a rehash of Ethereum’s L2 and what the differences are.
What do they think?
Regarding Solana’s Layer 2, Solana co-founder Toly said, “L1 cannot prevent anyone from building L2 on Solana. As an engineer, if there are any technical issues, I will fully support them. Although the L2 execution environment is competitive with L1. The main difference between ETH and Solana is that ordinary tx bytes on Solana L1 are already as cheap as blobs. Solana’s fees are driven by hotpots, and L2 is irrelevant to this. Therefore, the fees charged by Solana L2 and Solana L1 to users will be roughly the same.”
On the other hand, Kyle, a partner at Solana’s main investor, Multicoin, expressed skepticism about Solana L2, saying, “I think people will build L2 on Solana, which is permissionless. Go ahead, no one will stop you. But I don’t think they will achieve meaningful adoption. I could be wrong, let’s wait and see!”
Similar user fees, lack of meaningful adoption… Does Solana’s Layer 2 surpass Ethereum’s weakness? Let’s see what these projects have actually built.
Zeta Markets
Zeta Markets is developing a Layer 2 solution called ZX. ZX is an optimistic rollup based on Solana, aiming to improve the speed and scalability of decentralized transactions by using zero-knowledge proofs (zk-proofs) for trustless on-chain settlement.
Features of ZX:
High throughput: ZX can process 10,000 transactions per second (TPS), significantly improving transaction performance.
Low latency: Transaction confirmation time is less than 10 milliseconds, close to the performance of centralized exchanges.
Seamless trading experience: Provides one-click trading functionality to simplify user operations.
High leverage options: Supports up to 50x leverage and offers multiple collateral options.
Zero-knowledge proofs: Uses zk-proofs to achieve trustless on-chain settlement, ensuring transparency and security of transactions.
$Z token: The native token $Z of ZX will serve as gas fees for transactions and incentivize participants.
Why build L2 on Solana for these features?
According to Zeta Markets’ litepaper, the reasons for building Solana Layer 2 include:
Improving transaction performance: While Solana’s Layer 1 already has high throughput and low latency, ZX adopts optimistic rollup and zk-proofs technology to further enhance the performance of decentralized transactions. These technologies can achieve performance close to centralized exchanges (such as 10,000 TPS) while maintaining decentralization and security (Solana L1’s real TPS is 1000-2000).
Addressing congestion issues: Solana may encounter network congestion during periods of high transaction volume. By offloading some transaction processing to Layer 2, ZX can alleviate the burden on Layer 1, thereby improving overall network efficiency and stability.
Reducing transaction costs: Although Solana’s transaction fees are already relatively low, ZX can further reduce user transaction costs through Layer 2 solutions, especially in high-frequency and large-scale transaction scenarios.
Enhancing user experience: ZX aims to provide a seamless trading experience, including one-click trading and transaction confirmation times below 10 milliseconds. On Solana L1, the block interval is 400 milliseconds. These improvements will make the user experience closer to centralized exchanges while retaining the advantages of decentralized trading, such as self-custody and transparency.
Ecosystem integration: Solana’s DeFi ecosystem is growing rapidly, and the introduction of ZX will further enhance the liquidity and interoperability of this ecosystem. ZX plans to leverage Solana’s low transaction fees and fast block times to accelerate the final settlement of Rollup blocks, thus improving the user experience.
In summary, Zeta is building the Solana Layer 2 solution ZX to enhance the performance, reduce transaction costs, improve user experience, and address network congestion for decentralized trading. These improvements are necessary to meet the growing demand for DeFi and enhance the overall competitiveness of the Solana ecosystem.
marginfi
marginfi is the second-largest lending protocol on Solana in terms of Total Value Locked (TVL). Is its newly launched liquidity layer considered a conventional L2?
Not really! Despite having “layer” in its name, marginfi’s liquidity layer is not a conventional L2 but rather an integrated “liquidity layer” protocol that aims to provide liquidity support for DeFi applications on Solana.
Features of the liquidity layer:
Integrated liquidity layer: As Solana’s first liquidity layer, marginfi allows traders to access liquidity without the need for cross-chain bridging.
Risk management system: marginfi’s risk management system manages the risk of the liquidity layer, and each bank can define its own risk parameters.
Multi-asset support: Users can borrow and lend 16 different assets simultaneously, providing greater flexibility in liquidity management.
High yield: Users can earn integrated native staking and token rewards.
Support for decentralized applications: Provides necessary infrastructure for decentralized applications such as trading, indexing, and payments.
As a liquidity layer focused on providing liquidity support and risk management for DeFi applications on Solana, the liquidity layer is not a conventional Layer 2 solution in the traditional sense. It does not have its own execution environment, sequencer, or full nodes. However, this unconventional L2 with Solana characteristics may be a valuable layer for the L1 network.
Which would you choose: a liquidity layer that provides access to liquidity without the need for cross-chain bridging or the fragmented liquidity of Ethereum L2?
Key differences from Ethereum L2
Due to various architectural and design differences, Solana L2 and Ethereum L2 have the following notable differences:
Transaction fee fluctuations:
Although transaction fees on Ethereum L2 have significantly decreased, they still fluctuate, especially during periods of high network load. In contrast, Solana’s L2 solution continues to maintain low transaction fees, typically below $0.01, and the fees remain stable, unaffected by changes in network load.
Transaction speed:
While the transaction speed of Ethereum L2 has improved, it still lags behind Solana’s native network. Solana’s transaction confirmation time is very short, typically around 400 milliseconds, while Ethereum L2 transaction confirmation time can be between 5-10 seconds. Solana’s L2 solutions, such as ZX, can process 10,000 transactions per second (TPS) with transaction confirmation times below 10 milliseconds, significantly improving transaction speed.
Interaction complexity:
Solutions like marginfi’s liquidity layer seamlessly integrate with the native network, providing access to liquidity without the need for cross-chain bridging, simplifying the user experience.
In conclusion, Solana’s L2 solutions have been designed to address common criticisms of Ethereum L2, providing a good user experience, low transaction fees, high security, and fast transaction speeds. They also complement the functionality of Solana L1 and meet more demands. Let’s wait and see how Solana L2 develops along with Kyle’s expectations.