The era of Layer 2 solutions: a turning point for the blockchain ecosystem
Raphaël Wernert
12/27/23
In the constantly evolving world of blockchain, a new protagonist is emerging with disruptive potential: layer 2 solutions. While layer 0 and layer 1 blockchains paved the way with their robustness and security, they are now coming up against a ceiling in terms of transaction capacity. With the growing popularity of cryptocurrencies and decentralised applications, the volume of transactions is beginning to overwhelm the capacity of the main chains, revealing the pressing need for innovative solutions.
Layer 1 chains, such as Bitcoin and Ethereum, are renowned for their unwavering security, but they are often criticised for their lack of speed and high cost per transaction. Layer 2 solutions, on the other hand, promise to be the remedy for these ills. By building on the secure foundations of layer 1, layer 2 solutions enable fast transaction execution, increased capacity and a significant reduction in costs.
Projects such as Lightning Network for Bitcoin and Optimism and Arbitrum for Ethereum are perfect examples of the potential of layer 2 solutions. Lightning Network, for example, facilitates low-cost, near-instantaneous Bitcoin transactions by creating a network of off-chain payment channels. Optimism and Arbitrum, meanwhile, use the concept of rollups to process transactions outside the main Ethereum chain, before aggregating and securing them on it. These initiatives show how layer 2 can transform the cryptocurrency landscape, making transactions faster, cheaper and more scalable.
Layer 2 solutions such as ZK-Rollups and Optimistic Rollups offer different methods of improving the scalability of blockchains, while preserving security and decentralisation.
ZK-Rollups use cryptographic proofs, known as SNARKs (Succinct Non-interactive Argument of Knowledge), to process multiple off-chain transactions. These cryptographic proofs, or proofs of validity, are then submitted to the main blockchain, such as Ethereum. By combining multiple transactions into a single cryptographic proof, ZK-Rollups significantly reduce the amount of data required to validate a transaction on the main chain. This not only reduces transaction costs, but also speeds up transaction processing. ZK-Rollups are particularly effective in reducing the size of transactions by representing accounts not by full addresses, but by indices, thus reducing the size of transaction data from 32 bytes to just 4 bytes.
Optimistic Rollups, on the other hand, take a different approach. They operate in parallel with the main chain and assume by default that all transactions are valid. This assumption increases efficiency by avoiding the initial verification process for each transaction. However, to guarantee security, Optimistic Rollups introduce a mechanism called "fraud proof". This system allows network participants to challenge the legitimacy of a transaction. In the event of a challenge, the transaction is recalculated and verified. If a fraud is proven, the party responsible loses its deposit, while the costs incurred for the verification are reimbursed to the party who detected the fraud. This mechanism ensures the integrity of the system while enabling transactions to be processed more quickly.
While ZK-Rollups focus on transaction data compression and space optimisation, Optimistic Rollups rely on the assumption of transaction validity to speed up the process, while incorporating a verification system in the event of a dispute. These two technologies represent significant advances in the search for solutions for the scalability of blockchains, each bringing its own strengths and mechanisms for achieving this objective.
To achieve mass adoption and large-scale use of blockchain, it is crucial to guarantee both layer 1 security and layer 2 transactional efficiency. This marriage of integrity and performance makes layer 2 solutions an indispensable element in the future of blockchain technology. By solving the problems of scalability and cost, layer 2 opens the door to new blockchain applications in various sectors, from finance to logistics, and even beyond.
Polygon is emerging as a key Ethereum partner in building Web3, the 'Internet of Tomorrow'. With considerable value concentrated in its core network and growing adoption of its ancillary networks, Polygon is proving to be a rising force. The promising development of zk-Rollups solutions, in which Polygon excels, augurs a bright future for its MATIC token.
