Blockchain technology continues to advance, with Ethereum hitting a record of 2 million transactions per day in January 2024. However, scalability issues between first-layer (L1) chains like Bitcoin and Ethereum continue to limit widespread adoption. To address these issues, second-layer (L2) solutions have emerged. These technologies aim to speed up transactions and reduce costs without compromising the security and decentralized nature of the L1 network. According to L2Beat, L2 scaling solutions have transformed Ethereum, processing 11-12 times more transactions than Ethereum itself. This article will explore the L2 ecosystem, including its key innovations, challenges, and future directions.
1. The origin of L2
As more and more users conduct transactions on L1, these networks become slower and more expensive. Solving the scalability problem on L1 usually means compromising between security or decentralization, two characteristics that all blockchains want to have. This compromise of only being able to choose two of the three desired characteristics of scalability, decentralization, and security is known as the "blockchain trilemma."
Solving the blockchain trilemma is particularly important for Ethereum, as it has become the preferred L1 for building decentralized applications (dApps). Of the three desired characteristics, Ethereum chose security and decentralization at the expense of scalability. In order to expand the number and types of use cases for Ethereum, building more complex dApps must be economically feasible.
L2 solutions emerge as a way to address these issues by moving most of the computation for processing transactions from the base layer to the second layer, increasing transaction throughput, reducing costs, and improving user experience. The goal is to achieve higher scalability while leveraging the security and decentralization of the underlying L1 blockchain.
2. Core technologies and frameworks
Today, the L2 ecosystem has a total locked value (TVL) of over $46 billion and includes a variety of technologies and frameworks with unique characteristics. Here are some of the most important technologies:
Rollups
There are two types of Rollups: Optimistic Rollup and Validity/Zero Rollup.
Knowledge Rollup). Optimistic aggregation chains assume that transactions are valid by default. They make the network
Network participants are able to challenge transactions that are expected to be fraudulent using "fraud proofs" to prove that they are invalid. In contrast, validity aggregation chains use "validity proofs" to verify the validity of each transaction submitted to the base layer. Both types of aggregation chains provide higher throughput and lower fees than L1.
State Channels
State channels allow participants to conduct off-chain transactions by locking a portion of the blockchain state into a multi-signature contract. Participants can freely trade off-chain, and the final state is settled on-chain. State channels provide almost real-time transactions and low fees, but have certain limitations in terms of functionality and the number of participants.
Plasma (Shard Chain)
Plasma is a framework for creating layered sidechains that are 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 aggregation chains, Plasma chains use fraud proofs to challenge suspicious transactions.
3. Review of the L2 ecosystem
The L2 ecosystem is developing rapidly, with numerous projects and initiatives working to scale the main L1 blockchain. While there are solutions dedicated to bringing scalability to Bitcoin, such as the famous Lightning Network, which uses state channels to provide faster and cheaper transactions on the network, there is no L2 solution for general-purpose computing on Bitcoin.
Ethereum, on the other hand, has spawned a thriving ecosystem of L2 solutions. Here is a brief description of some of the main players:
Validity Aggregation Chain (also known as Zero-Knowledge Aggregation Chain)
- Starknet: has the fastest growing developer community, features native account abstraction and its own programming language (Cairo), optimized for leveraging validity proofs.
-zkSync: Another leading validity aggregation chain with native account abstraction, running on the Ethereum Virtual Machine (EVM).
- Scroll: An EVM-compatible validity aggregation chain focused on native-level compatibility with existing Ethereum dApps and tools.
- Polygon zkEVM: Developed by L2 scaling veteran Polygon, an EVM-compatible validation aggregation chain.
-Linea: Powered by Consensys, the company behind MetaMask, Linea is a validation aggregation chain that can be used directly through MetaMask.
Optimistic aggregation chain
- Arbitrum: The largest optimistic aggregator chain measured by total locked value (TVL), compatible with the EVM.
- Optimism: The second largest optimistic aggregation chain by TVL, compatible with EVM.
- Base: The third most optimistic aggregator chain by TVL, compatible with EVM.
Many of these projects are still in their early stages, often involving a period of centralized control known as a “training wheels” phase, which allows for controlled system updates and bug fixes. While necessary initially, these training wheels should eventually be removed to achieve the desired decentralized and trustless operation.
The adoption of L2 solutions has been growing steadily in various fields including decentralized finance (DeFi), non-fungible tokens (NFTs), and on-chain games. The most commonly used types of L2 tend to be optimistic aggregation chains and validity aggregation chains. However, the integration of L2 solutions is not without challenges.
4. Challenges and Solutions
Although L2 solutions hold great promise, there are still challenges to overcome before their full potential can be realized. 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 the user experience through better wallet integration, easier onboarding, and more intuitive interfaces will be critical to driving mainstream adoption.
That’s why Starknet provides built-in account abstraction features that enable a smoother user experience, such as transaction signing via facial and fingerprint recognition (as provided by the Braavos wallet). On Starknet, making Ethereum scale means that a Web2-style user experience is just as important as cheaper and faster transactions.
5. Prospects of L2
As the L2 ecosystem matures, we can expect a wave of innovation, such as local account abstraction capabilities on Starknet. Hybrid solutions that combine the advantages of different L2 technologies have begun to emerge, providing dual benefits for optimistic and validity aggregation chains. Advances in validity proofs (such as STARKs) further improve 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 continue to evolve and new consensus mechanisms such as proof of stake are promoted, L2 solutions will need to adapt and integrate seamlessly with these changes.
In the coming years, we will see a flourishing of L2 solutions tailored to specific use cases and application areas. Some predict that L2 networks will eventually become the main layer for user interaction, while L1 will serve as a secure settlement layer. Others envision a multi-layered blockchain architecture, with L2 solutions developing in parallel with each other, sometimes with a third layer (L3) chain on top of them, to create a scalable and interoperable ecosystem.
6 Conclusion
As the L2 ecosystem continues to grow, collaboration and contributions between developers, researchers, and users are critical 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 unlock new possibilities for decentralized applications. The road ahead is full of challenges and opportunities, but with the right approach and a shared vision, we can build a scalable and inclusive blockchain ecosystem that empowers individuals and transforms industries.
