Who can stand out in the competitive Layer2 circuit?

Ethereum, the world's second largest blockchain, has struggled with capacity expansion for years. As more and more decentralized applications (DApps) are built on top of the platform, it becomes more urgent than ever to handle an increasing number of transactions and data storage needs. This is where Ethereum's second layer solution, known as "Layer2" or "L2", comes in. These solutions are designed to provide a scalable, efficient and low-cost infrastructure for DApps built on Ethereum.

This article will compare five of the most popular Ethereum Layer 2 solutions, including Arbitrum, Optimism, Loopring, zkSync, and Aztec Network. We'll take a closer look at each solution's unique features, pros and cons, and application scenarios.

The concept of Layer2

With the development of blockchain technology, people began to put forward a new concept - "Layer2". So, what is Layer2?

Layer2 is an important concept in blockchain technology. It refers to building a new layer of protocols on the basis of blockchain to increase the processing power and transaction speed of blockchain. In short, it is to add an extra layer of "highway" on top of the blockchain to make transactions faster and more convenient.

Unlike traditional Layer1 (bitcoin, Ethereum, etc.), the Layer2 protocol does not make any modifications to the underlying blockchain, but rather enables high-speed transactions by building protocols on top. As a result, Layer2 can dramatically increase the transaction speed of blockchain by a factor of ten, while also significantly reducing transaction costs.

The advantage of the Layer2 protocol is that it can handle more transactions while ensuring the security and reliability of the transactions. Moreover, because Layer2 is built on top of existing blockchain technology, it is relatively inexpensive to develop and deploy, making it easier for widespread adoption.

The Layer2 protocol is also widely used. The emergence of these protocols not only solves the problem of insufficient processing capacity of blockchain, but also provides the possibility for large-scale application of blockchain. In a word, Layer2 is an important development direction of blockchain technology. It can bring more efficient, safer and more convenient transaction experience to blockchain, and inject new vitality and impetus into the development of blockchain.

Representative item

Arbitrum

Arbitrum is a Layer 2 solution designed to address Ethereum's scalability, speed, and privacy issues. It uses Optimistic Rollups' scheme to process transactions down the chain and then submit them to the Ethereum mainnet. This reduces Gas bills, increases scalability, and enhances privacy. Arbitrum allows the creation of smart contracts that allow developers to build new projects on top of the Layer 2 protocol. Network effects drive the success and adoption of cryptocurrencies.

Since Arbitrum launched in August 2021, the ecosystem has grown exponentially, and many projects have started and migrated to the network. Arbitrum has surpassed Binance Smart Chain and ranks second in daily and weekly transaction volume. However, the total lock-in value is still lower than Ethereum, Binance Smart Chain, and Tron. Arbitrum team skillfully used the airdrop speculation, maintain the heat, improve the trading volume and the number of transactions.

Optimism

Optimism Optimism is a second layer solution based on Ethereum that uses Optimism Rollup to improve network scalability and efficiency. As its name suggests, it is the author of Optimism Rollup. Trade confirmation is very fast and costs are also very low, so DApps constructed on Optimism can achieve efficient, low-cost transactions. Optimism also provides a fully Ethereum-compatible environment, making it easy for developers to migrate existing Ethereum Dapps to Optimism.

Loopring

Loopring is a Layer 2 solution focused on a decentralized trading platform (DEX), designed to provide a scalable, efficient infrastructure for DEX. It uses zero-knowledge proof mechanism to confirm transactions, which enables DApps built on Loopring network to realize faster and more private transactions. At the same time, Loopring also provides a highly flexible transaction structure, allowing developers to build various types of DEX applications according to their requirements. But unfortunately, currently Loopring focuses on transactions and has no intention of building it into a general-purpose blockchain.

zkSync

zkSync is a Layer 2 solution based on Ethereum that utilizes a zero-knowledge proof mechanism to improve network scalability and efficiency. Its core idea is to take the transaction confirmation process out of the Ethereum network to reduce the time and cost of transaction confirmation. Dapps built on top of zkSync allow for faster and more efficient transactions while also enjoying the security and programmability of Ethereum smart contracts.

Aztec Network

Aztec Network is a Layer 2 solution focused on providing security and efficiency for Dapps built on Ethereum. It adopts zero-knowledge proof technology to encrypt transaction data, so as to protect the privacy of users and transaction security. At the same time, Aztec Network also supports complex financial contracts and asset management, enabling Dapps built on it to realize more diversified financial applications.

Future Development Trend  

Layer2 is an important area of blockchain technology that aims to address capacity expansion and performance issues on public chains such as Ethereum. In the future, the development trend of Layer2 circuit can be summarized into the following three aspects:

Constant innovation and improvement in technology

At present, Layer2 technology mainly includes status channel, side chain and Rollups. In the future, as the technology continues to innovate and improve, these technologies will continue to be optimized and refined to improve their performance, security, and scalability. For example, state channels can be improved by introducing more optimization algorithms and protocols to improve their efficiency and security, and Rollups can be further subdivided into different variants such as OP systems and ZK systems to meet the requirements of different application scenarios.

Especially after Ethereum moved to PoS, with the support of Lido, Coinbase, Ebunker and other mining pools, the stable block production of Ethereum also allows L2 to play a big role. There are many L2 features that Ethereum couldn't upgrade in the PoW era.

The continuous expansion and deepening of application scenarios

Layer2 is currently used in a wide variety of areas including DeFi, gaming, NFT, and payments. In the future, with the continuous development and improvement of Layer2 technology, its application scenarios will continue to expand and deepen. For example, Layer2 technology could be applied to asset management, insurance, supply chain management and digital identity to enable more blockchain application scenarios.

The gradual maturation and improvement of the ecosystem

At present, the Layer2 ecosystem is still in its infancy and needs to be continuously developed and improved. For example, you can build a better developer and user community, provide better development tools and application interfaces, and build a more stable and reliable Layer2 infrastructure.

In short, the development trend of Layer2 circuit in the future will mainly focus on three aspects: technological innovation, application scenario expansion and ecosystem improvement. Layer2 technology plays an important role in solving the performance and capacity problems of public chains, and will help Ethereum and other blockchain technologies to remove the "straitlock" of performance bottlenecks.

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