Ethereum no longer needs an introduction, as the second-most popular cryptocurrency already took the world by storm recently. With numerous updates and innovative projects, the blockchain solution has been adopted by multiple businesses for its scalability, transparency and safety features. The latest switch from PoW to PoS and the Merge propelled Ethereum into the mainstream and affected its price fluctuations. Next, the Shanghai update is expected to deal with issues such as high fees and liquidity concerns.
Being a complex network and ecosystem, Ethereum leverages multiple solutions, such as smart contracts, the EVM and layer 2 protocols. Along with Layer 1 blockchain, Layer 2 protocols help maintain operational performance and reduce congestion when the network is crammed. At the same time, these features decrease gas fees and improve the system in which developers create applications.
Let’s see how Layer 2 protocols promote Ethereum-based projects.
Different Layer 2 protocols provide various benefits
As the blockchain evolved, more Layer 2 protocols were developed for various purposes. For example, state channels allow transactions outside the blockchain; they ensure high transaction output and low fees but are slowed down by cross-chain interoperability.
Plasma, another Layer 2 protocol, develops unlimited side chains through smart contracts and Merkle trees. Therefore, Ethereum can manage an increased amount of data, but the withdrawal time can last up to two weeks.
Finally, the most common, roll-ups, are similar to Plasma but provide increased security and eliminate centralization. Roll-ups divide into optimistic roll-ups, which execute transactions outside the blockchain, while zero-knowledge roll-ups are used to ease congestion by processing data in a single block.
What Layer 2 project is best?
The importance of Layer 2s stands in reducing risks at all levels. At the same time, they enhance utility by combining the advantages of TPS by leveraging an improved user experience and varying the purpose of applications. At the same time, by retaining security and decentralizations on the mainnet, Layer 2 solutions can reduce data load.
Ethereum and its Layer 2 protocols are expected to overtake Bitcoin and other blockchains, as many already base their technologies on it. Tether, Shiba Inu and Uniswap are only a few Ethereum-based tokens, which is why the following projects might experience a boost very soon.
Polygon blockchain, with MATIC as a native token, was created in 2021 and described as a Web3 and metaverse project. Based on the Ethereum Layer 2 scaling technology, Polygon is now a sidechain whose features include fast transactions and low fees. Polygon users can interact with exclusive DApps on the Ethereum network.
Based on Ethereum, the project uses a PoS sidechain to validate transactions and vote on the network. Still, developers interested in creating new applications can build additional side chains through plasma and roll-up Layer 2 protocols. Polygon blockchain is widely known as an excellent solution that provides better solutions than Ethereum’s blockchain, such as lower transaction fees and fast transactions. Still, it’s not that popular as a cryptocurrency but more as a tool.
The modular Layer 2 protocol was developed by a decentralized autonomous organization and was built on Ethereum. Using the BitDAO governance token, Mantle ensures expanding its utility. The project can process various transactions in separate layers, and this provides lower gas fees and increased Ethereum-grade security.
Mantle is going toward sequencer decentralization to allow multiple nodes to operate and receive awards, which eventually reduces operational risks of roll-up models, from legal issues to complex structuring. The solution also uses decentralized data availability and bridging to optimize blockchain functions and increase staking utility for BIT.
The Ethereum-based scaling solution has been created to solve the problem of congestion on the networks and also increase transaction speed. One of its promising features was the validation of 40,000 TPS (transactions per second) for a cost of less than two cents. Arbitrum uses optimistic roll-ups to validate smart contracts, which helps developers build apps without learning a certain coding language.
Although Arbitron doesn’t have a native token, users can invest in it through the projects created in Layer 2 that are native to the roll-up solution. Besides the regular scaling solution, Arbitrum has its own roll-ups that store data on-chain for optimal scalability. This allows the merging of diverse scaling tools to make Arbiutrum easier to work with.
Another project built on the Ethereum blockchain, Immutable X, is solely used for NFTs. Web3 gaming developers can use this Layer 2 solution to launch their NFT creations with lower gas fees and benefit from certain scalable features. Immutable X uses zero-knowledge roll-ups that achieve the batching of multiple transactions into single SK proofs and stores them off-chain.
The Ethereum-based tool is one of its first kinds, and its uniqueness comes from requiring less
storage and computing resources for5 the validation of transactional blocks. Therefore, developers benefit from the speed of this process as Immutable X can process more than 9,000 NFT trades per second, which is promoted by the play-to-earn ecosystem that incentivizes players.
Shibarium is linked with the Shiba Inu ecosystem and is based on Ethereum’s Layer 2 blockchain scaling solution. This project aims to boost the utility of the native token so that the official community can sustain the growth of the cryptocurrency. Shibarium is set to take over a considerable number of transactions so that the Ethereum network won’t have to handle them all anymore. The results would include faster transactions and reduced gas fees.
Considering the growth of Shiba Inu recently, it would be best to invest in this project sooner because Shibarium will benefit from the increasing number of investors and users. The Layer 2 solution also has a governance token, BONE, that can improve Shibarium’s utility tokens.
As Ethereum is set to change the world and overtake Bitcoin, more projects based on its blockchain emerge to create improved tools for businesses and users. The technologies discussed above rely on the Layer 2 scaling solutions that Ethereum has provided. With the help of smart contracts and DApps, more cryptocurrency blockchains and side projects will develop.