Crypto enthusiasts often look to Ethereum as much more than a digital asset, believing it has intrinsic value and offers singular investment opportunities. Ethereum has succeeded in outperforming other cryptocurrencies, including Bitcoin, as regards growth and trading volume. Transactions leverage a decentralized ledger to eliminate the need for a central authority or intermediary. The open-source blockchain platform with distributed ledger technology supports smart contracts and decentralized applications. Investing in Ethereum is easier than you think. You can trade immediately at the best available Ethereum price on top platforms such as Binance. You can deposit fiat currency, like dollars or Euros, and get Ethereum in exchange.
The Ethereum mainnet is designed to be a public blockchain, not an enterprise platform, meaning it doesn’t scale effectively or has low scalability with a huge amount of data. The good news is that a new generation of scaling solutions can address the transaction-capacity problem, helping make considerable progress. We’re talking about Layer 1 and Layer 2 scaling solutions. If you’d like to learn more, please stick around for a bit.
The Blockchain Trilemma
Chances are that you’ve heard about the blockchain trilemma. Blockchain technology oversees three major aspects, namely security, decentralization, and scalability. The trilemma refers to the fact that it’s difficult, if not impossible, for blockchains to attain optimal levels of all three capacities simultaneously. For example, if the blockchain is secure and scalable, it can’t be decentralized. The throughput rate of transaction processing power becomes weaker in fast-batched transaction records. Scaling solutions solve the blockchain trilemma, therefore, making it possible for blockchains to have all three properties at the same time. Attention should be paid to the fact that solutions vary quite a bit, and there’s a lot to unpack when trying to grasp these new technologies.
Layer 1 Scaling Solutions
Layer 1 designates the base network, i.e., Ethereum. It’s the foundation of the respective ecosystem, so it has an independent consensus mechanism. The L1 blockchain provides the most crucial services to the network, validating transactions, processing tasks, and executing contracts. Since Ethereum is secure and decentralized, it can get slow and expensive to process transactions on the mainnet when the network becomes congested. Several methodologies are being developed (and put into practice) to enhance the scalability of the blockchain network without delay. Until recently, sharding was expected to scale Ethereum, splitting the network into shard chains to share the load of the network.
A Layer 1 scaling solution alters the protocol directly to achieve near-instant transaction speed, accommodating more users and data. Sharding, an idea borrowed from the world of databases, involves subsets of validators that are responsible for individual shards. Nevertheless, with the development of proto-danksharding, the Ethereum community has come to prefer rollup-centric scaling instead of scaling by sharding. For the sake of clarifying, proto-danksharding is a way for rollups to add more affordable data to the blocks. The name comes from the two researchers who came up with the idea – Protolambda and Dankrad Feist. Proto-danksharding allows Ethereum to grow without slowing down, even if more people start to use the network.
Layer 2 Scaling Solutions
Layer 2 is an off-chain network that helps extend the capabilities of the underlying blockchain, introducing enhancements such as higher transaction outputs. It exists to address issues of high gas fees during times of network congestion. Layer 2 scaling solutions involve transferring a portion of the blockchain protocol’s transactional burden to a nearby system architecture. Transactions are batched together every now and then; they’re sent back to the base Layer 1 network to be validated by the Layer 1 node as a single transaction. Examples of Ethereum Layer 2 solutions include but aren’t limited to Polygon, Mantle, Arbitrum, Optimism, and Immutable X.
There’s one Layer 2 solution deserving of your attention. That’s Polygon, often called “Ethereum’s internet of blockchains.” Polygon is a scaling solution for Ethereum and Proof of Stake blockchains that makes available various tools for improving the speed and reducing the cost and complexities of transactions. It’s not an autonomous blockchain, meaning that if Ethereum experiences disruptions, it can result in unintended, damaging consequences for regular users. Equally, the Total-Value-Locked on-chain is roughly $4 billion. We’re talking about the total amount of crypto assets that individuals have locked into protocols on the network.
Can Ethereum Be Layer 2 For Solana?
Contrary to popular opinion, Solana isn’t a Layer 2 scaling solution but a blockchain platform that hosts decentralized, scalable applications. It was designed to work much like and improve Ethereum. Nitro is the first Layer 2 scaling solution for Solana, built as an optimistic rollup and allowing for instant transactions to take place. The developer community can use smart contracts without much difficulty in Cosmos, so apps can connect with integrated assets. The Solana and Nitro partnership entails introducing a secondary standard built on top of a high-performance programming language. Sei is the primary Layer 1 trade blockchain; it’s use-case specific.
According to Solana co-founder Anatoly Yakovenko, Ethereum could be a Layer 2 scaling solution for Solana. He indicated that the technical collaboration isn’t as implausible as it seems, bridging assets from Solana to Ethereum. Users would have finality guarantees, meaning they would be able to go back to Solana in cases of double-spending or invalid transition. Needless to say, creating this setup would require submitting all Ethereum transactions to Solana and including a Simplified Payment Verification (SPV) route to have evidence that consensus has been reached. Wallets running on low-end systems could verify if transactions have been included in Solana.
The bottom line is that each Layer 1 blockchain can operate its own set of Layer 2 networks to scale the underlying infrastructure. Withdrawals from Layer 2 networks can take hours to days. Withdrawing from an optimistic rollup is more difficult due to the fraud prevention scheme. Simply put, you must wait until the challenge period elapses, and that could take seven days. Layer 1 and Layer 2 scaling solutions are very closely related, although they seem different – they’re designed to make the Ethereum blockchain work faster and fit in a fast-growing user base.