Blockchain technology, from its launch back in 2009, continues to offer great benefits.
The benefits include decentralization, trustless interactions, top-notch security, and immutable record-keeping. However, scalability has been one underlying problem with blockchain networks.
However, sometimes blockchain meets some limitations. Such can be attributed to blockchain having insufficient capacities.
Scaling solutions are necessary as they provide relief for a blockchain without increasing block sizes.
Analogy 1: "Layer 2 solutions can be equated to a sideroad. The sideroad can offload traffic from the main road (the layer 1 chain), to increase the number of cars travelling at the same time (increase number of transactions per second)." ~Nasdaq
Analogy 2: "Let’s think of a building in which some families are living already but we want to house some more families and decongest the building also. How can we do that?
We can do that by building additional floors on top of the building . Ethereum layer 2 scaling solutions are the same as building on top of the existing foundation of Ethereum layer 1 .
By doing this we get the benefits of Ethereum's security and decentralization and we also scale Ethereum successfully.
By this analogy, layer 2 solutions are like building additional floors on top of existing foundations whereas Ethereum upgrade is like solidifying and broadening the foundation itself." ~DappWorld
Layer-1 vs. Layer-2 Scaling Solution
The main difference between Layer-1 and Layer-2 scaling solutions is in the role and focus on the blockchain. Layer-1 refers to the main blockchain, while Layer-2 mainly refers to a network sitting on top of the main blockchain.
Therefore, Layer-2 scaling solutions are the technology that runs on top of a blockchain protocol, improving the speed and efficiency of the underlying blockchain.
As such, Layer-1 mainly improves the blockchain architecture, whereas Layer-2 builds thyroid-party networks on top of the main blockchain. Layer-1 provides the most effective solution in large-scale protocol upgrades.
On the other hand, the validator must be willing to accept changes that come through a hard fork.
Additionally, Layer-2 is a more straightforward way to increase scalability. However, there is the use of thyroid parties, which can make users lose the level of security the original blockchain provides.
Bitcoin and Ethereum cannot execute thousands of transactions per second (TPS), hurting their long-term growth.
As such, Layer-2 protocols are an added system that allows blockchain transactions and operations to occur. Therefore, such measures are sometimes deemed to be off-chain scaling options.
How do Layer-2 Solutions Work?
There is a connection between Layer 1 and 2, and there is the uploading of a summary of transactions in Layer 2 to Layer 1 in intervals.
Layer 2 mainly includes the activity of receiving a part of the transaction weight of a blockchain protocol to an end-to-end system architecture.
Therefore, the base layer blockchain grows less packed and more scalable.
Types of Layer-2 Solutions
These are some examples of Layer-2 solutions.
1. Sidechains
Sidechains come as a hybrid between Layer 1 and Layer 2 solutions to scaling. A sidechain is a blockchain linked to the main chain, such as Bitcoin.
A protocol allowing for the transfer of cryptocurrency openly to a Layer-2 chain from the main chain links the chains with a two-way peg (2WP). There must be a degree of third-party trust for the linking to occur.
Additionally, with sidechains, there may be testing of new protocols.
2. Plasma Chains
The primary functioning of these Layer-solutions is that they employ subsidiary blockchains that, in turn, assist with verification in the parent chain.
Plasma chains compare to Polkadot smart contracts or parachains. However, plasma chains appear in a hierarchy, removing transactions from the main chain. Therefore, it saves time and improves scalability.
Parachains, in short, are “parallel chains.” As such, they are a system of linked blockchains, and they run parallel to one another.
They are built on the same framework. They have the same security features and are linked to the central relay chain.
3. Rollups
Rollups are Layer-2 scaling solutions that remove some processing of transactions of the leading Ethereum network and still post data to Layer 1.
As the transaction data is on Layer 1, the same Layer 1 security requirements apply to rollups.
Rollups are advantageous as they lower transaction prices, allow transaction throughput, and broaden participation. There are two types of rollups;
Optimistic rollups
Zero-knowledge rollups
Takeaway
Layer-2 solutions come significantly as they provide scalability and greater throughput, maintaining the Ethereum blockchain’s integrity. In turn, this allows for total decentralization, transparency and security.
There is no Layer-2 solution that presently satisfies all the requirements. As such, they are still striving to enhance all these qualities.
Comments