Author: Starknet; Translator: Plain Language Blockchain
The blockchain technology continues to evolve, with Ethereum achieving a record-breaking 2 million daily transactions in January 2024. However, the scalability issues between first-layer (L1) chains like Bitcoin and Ethereum still limit their widespread adoption.
As a result, second-layer (L2) solutions have emerged: a series of technologies aimed at speeding up transactions and reducing costs without compromising the security and decentralization of leading L1 networks. According to L2Beat data, L2 scaling solutions have already transformed Ethereum, processing transaction volumes 11-12 times that of Ethereum itself.
This article delves into the L2 ecosystem, including its key innovations, challenges, and future development directions.
1. Origin of L2
With more users transacting on L1, these networks have become slower and more expensive. Solving the scalability issues on L1 often means compromising between security or decentralization, both of which are desired features of all blockchains. This trade-off between scalability, decentralization, and security, known as the “blockchain trilemma,” is a challenge that must be addressed.
Solving the blockchain trilemma is crucial for Ethereum, as it has become the preferred L1 for building decentralized applications (dApps). Ethereum has chosen security and decentralization over scalability as a compromise among these three expected blockchain features.
To expand the use cases and types of applications on Ethereum, building more complex dApps must be economically feasible. L2 solutions have emerged as a way to address these issues by shifting most of the heavy computational work related to processing transactions from the base layer to the second layer to increase transaction throughput, reduce costs, and improve user experience while maintaining the security and decentralization of the underlying L1 blockchain.
2. Core Technologies and Frameworks
The total value locked (TVL) in the L2 ecosystem has exceeded $460 billion, encompassing various technologies and frameworks with unique characteristics. Let’s delve into some of the most important technologies in more detail:
Rollups – Rollups come in two types: Optimistic Rollup and Validity/Zero knowledge Rollup. Optimistic Rollups default to assuming transactions are valid. They enable network participants to challenge transactions suspected of fraud using “fraud proofs” to prove their invalidity. In contrast, Validity Rollups use “validity proofs” to prove the validity of each transaction submitted to the base layer. These types of rollups provide higher throughput and lower costs compared to L1.
State channels – State channels allow participants to conduct off-chain transactions by locking a portion of the blockchain state in a multisignature contract. Participants can freely transact off-chain, with the final state settled on-chain. State channels offer near-real-time transactions and low costs but have limitations in functionality and participant numbers.
Plasma – Plasma is a framework for creating layered sidechains anchored to the main chain. Plasma chains can process transactions off-chain and only submit periodic updates to the main chain, reducing 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 working to expand major L1 blockchains. While some solutions focus on bringing scalability to Bitcoin, such as the well-known Lightning Network, which uses state channels to provide faster and cheaper transactions on the network, a universal computation L2 solution has not yet appeared on Bitcoin.
On the other hand, Ethereum has fostered a thriving L2 solution ecosystem. We will focus on some of the key players and briefly describe them.
1) Validity Rollups (also known as Zero-Knowledge Rollups)
Starknet: The fastest-growing developer community for Validity Rollups, with native account abstraction and its programming language (Cairo), optimizing the ability to leverage validity proofs.
zkSync: Another leading Validity Rollup with native account abstraction running on the Ethereum Virtual Machine (EVM).
Scroll: A Validity Rollup compatible with EVM, focusing on local compatibility with existing Ethereum dApps and tools.
Polygon zkEVM: Developed by the L2 scaling veteran company Polygon, zkEVM is a EVM-compatible Validity Rollup.
Linea: Supported by the company behind MetaMask, Consensys, Linea is a Validity Rollup that can be used directly through MetaMask.
2) Optimistic Rollups
Arbitrum: The largest Optimistic Rollup based on TVL, compatible with EVM.
Optimism: The second-largest Optimistic Rollup based on TVL, compatible with EVM.
Base: The third-largest Optimistic Rollup based on TVL, compatible with EVM.
Many of these projects are still in the early stages, often involving a period of centralized control called the “bootstrapping phase,” which allows for controlled system updates and error fixes. While initially necessary, these bootstrapping phases should eventually be removed to achieve the desired decentralization and trustless operation.
The adoption of L2 solutions is steadily growing in various areas, including decentralized finance (DeFi), non-fungible tokens (NFTs), and blockchain-based games. The most common types of L2 solutions are often Optimistic Rollups and Validity Rollups. However, integrating L2 solutions is not without its challenges.
4. Challenges and Solutions
Despite the tremendous potential of L2 solutions, there are still challenges to overcome to realize their full potential. From a user perspective, interacting with L2 networks may be slightly more complex, requiring additional steps such as bridging assets and managing multiple wallets. Improving user experience by better integrating wallets, simplifying onboarding processes, and providing more intuitive interfaces will be crucial to driving mainstream adoption.
This is why Starknet offers built-in account abstraction functionality for a smoother user experience, such as transaction signing through facial recognition and fingerprint recognition (e.g., the Braavos wallet provides both features). On Starknet, expanding Ethereum means that a Web2-style user experience is as important as cheaper, faster transactions.
5. Future Outlook for L2
As the L2 ecosystem matures, we can anticipate a wave of innovation, such as native account abstraction on Starknet. Hybrid solutions combining the advantages of different L2 technologies are beginning 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 tied to the overall development of blockchain technology. As L1 networks evolve and new consensus mechanisms like proof of stake are promoted, L2 solutions will need to adapt and seamlessly integrate with these changes.
In the coming years, we will see a burgeoning development of tailored L2 solutions 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 multilayer blockchain architecture where L2 solutions develop in parallel, sometimes with a third layer (L3) on top to create a scalable and interoperable ecosystem.
6. Conclusion
As the L2 ecosystem continues to evolve, collaboration and contributions among developers, researchers, and users are crucial to developing robust and user-friendly L2 solutions.
By embracing the potential of L2 technology, the blockchain community can overcome the limitations of L1 networks and open up new possibilities for decentralized applications. The road ahead is filled with challenges and opportunities, but with the right approach and shared vision, we can build a scalable and inclusive blockchain ecosystem, empowering individuals and transforming industries.
