Translation: Blockchain in Vernacular
Imagine trying to get a thousand people through a single door at the same time. Chaos, right? That's what's happening with Ethereum right now. It's secure and decentralized, but when too many people try to use it at the same time, things get difficult, and transactions become slow and expensive. To solve this problem, developers are creating additional "lanes" to manage traffic, which are called layer 1 and layer 2 scaling solutions.
Our goal today is simple: to help you decide which chain to restake on. In this article, we will discuss:
The blockchain trilemma
The difference between first-layer expansion and second-layer expansion
Different types of Layer 2 solutions and their advantages
Top Ethereum Layer 2 Solutions
Bedrock Integration
The Future of Decentralized Finance (DeFi)
1. The blockchain trilemma
Blockchains face a fundamental challenge: achieving the three core properties of security, decentralization, and scalability simultaneously. This is known as the blockchain trilemma. The trilemma states that in order for the other two properties to work well, a blockchain must sacrifice one of them to some extent. Some blockchains can handle thousands of transactions per second, but this is achieved by sacrificing security or decentralization.
Nevertheless, many developers are working tirelessly to solve this trilemma. They are coming up with innovative ideas and technologies to improve scalability. These solutions fall into two categories based on how they interact with the main blockchain: layer 1 and layer 2.
2. The difference between first-layer expansion and second-layer expansion
Ethereum is very secure and decentralized, but the trade-off is that it can only process 15 transactions per second, which is relatively slow and expensive for nearly 500,000 daily active users. Imagine paying $200 in fees for a $15 transaction, that's ridiculous, right?
Soon, people realized that we needed a way to keep the security and decentralization of the main chain while increasing transaction speed. This is where layer-one scaling solutions such as Arbitrum come in. They process transactions off-chain and then record the results on the main chain, making the entire system more scalable without losing security. Of course, Ethereum has not stood idly by, and has also taken some important steps to improve scalability.
1) One-layer solution
Layer 1 scaling solutions improve the core layer of the blockchain, providing a way to directly process more transactions. These solutions adjust the rules of the network to speed up and process more transactions at once. The two main approaches are (1) changing the consensus mechanism and (2) sharding.
Changing the consensus mechanism: Switching to a more efficient consensus mechanism, such as Proof of Stake (PoS), can process transactions faster than traditional Proof of Work (PoW) systems like Bitcoin. This helps the network process more transactions.
Sharding workloads: Sharding divides the network's workload into smaller parts that can be processed simultaneously. Think of it as adding multiple parallel highways, enabling the network to handle more traffic at the same time.
2) Layer 2 Solution
Layer 2 scaling solutions build on top of existing blockchains, making them more scalable and efficient by processing transactions off-chain and then recording the results on the main blockchain. These solutions include state channels, sidechains, and Rollups.
A. State Channel
State channels allow you to conduct multiple blockchain transactions without putting every transaction on the blockchain. Imagine that you and Alice want to play a game of chess on Ethereum. Normally, each move requires a separate transaction, which is slow and expensive. State channels make this process much easier.
Start the game: You create a state channel smart contract on Ethereum, set the game rules, collateral (e.g. 0.1 ETH per person), and dispute resolution. Alice joins the game by locking her 0.1 ETH with you.
Off-chain game: You and Alice play the game off-chain, signing and sending moves to each other. The game state (board positions and player turns) is updated in the state channel.
End Game: When the game ends (checkmate!), the final state (winner, loser) and all moves are submitted to Ethereum for verification. The locked ETH (minus any penalties) is returned to your wallet.
Dispute Resolution: If a dispute arises (for example, Alice claims you made an illegal move), you or she can submit the latest signed state to the blockchain. Smart contracts resolve the dispute based on predefined rules.
This way, only the opening and closing moves and any disputes are recorded on Ethereum, while the rest of the operations happen off-chain. In the trade-off faced with the trilemma, state channels give up some decentralization for greater scalability.
State channel use cases in DeFi
Micropayments: The Lightning Network uses state channels to process millions of small transactions (such as in-game purchases) quickly and cheaply.
Decentralized exchanges: Networks such as Raiden provide DEXs with faster and cheaper transactions.
Prediction Markets: Platforms like Gnosis process many transactions and bets off-chain, scaling efficiently without overloading Ethereum.
B. Side Chain
A sidechain is an independent blockchain connected to Ethereum with its own rules, validators, and consensus mechanisms. Assets flow between the main chain and the sidechain through a channel, locking assets on the main chain while releasing a corresponding amount of assets on the sidechain.
The main differences from state channels:
A sidechain is a completely independent blockchain, while a state channel is a temporary off-chain transaction space.
The sidechain has an independent consensus mechanism, while the state channel relies on the main chain for final state verification.
C、Rollup
Rollup batches multiple transactions into a group, processes them off-chain, and then records a summary on Ethereum. This reduces the load on the main blockchain, making it faster and cheaper while maintaining security. There are two types: optimistic Rollup and zero-knowledge (ZK) Rollup.
OP-Rollup
OP Rollups are based on the principle of trust. They assume that transactions are valid unless challenged within a certain period of time. Examples include Arbitrum and Optimism.
ZK-Rollup
These use cryptography to prove the validity of transactions without revealing the details, providing faster withdrawals and greater privacy. However, they are more complex and less interoperable with other protocols. Examples include Immutable X and StarkNet.
So, which is better? It depends on your needs. OP-Rollup is faster to deploy and cheaper to use because of lower computational requirements. ZK-Rollup is more secure and more private, but also more complex.
3. Comparing the top Ethereum layer 2 solutions
Layer 2 solutions are essential to overcoming Ethereum’s limitations. Here is a detailed look at five of the top layer 2 solutions: Arbitrum, Base, Optimism, Blast, and Linea.
1) Decision
Technology: Arbitrum uses optimistic rollup to bundle transactions together and send them to Ethereum in one batch. This significantly reduces costs and increases speed. You can do the same things on Arbitrum as on Ethereum, like using Web3 applications and deploying smart contracts, but cheaper and faster. Its unique Nitro mode makes it ultra-scalable and secure.
Performance: Arbitrum can process up to 40,000 transactions per second, compared to Ethereum’s 15. It uses multiple rounds of fraud proofs to maintain security, which is more efficient than the single round proofs used by other solutions. Think of it as checking the problem over a long path in segments, rather than all at once.
Arbitrum has quickly gained popularity, with many DeFi projects such as GMX, Camelot, Aave, and BedRock joining to take advantage of lower costs and faster transactions. In addition, its decentralized governance with ARB tokens makes its ecosystem more robust.
2）Base
Technology: Developed by Coinbase, Base uses optimistic Rollup to process transactions off-chain and then submits the results back to Ethereum. This helps reduce congestion and transaction fees. Base is built on the Optimism stack, which enhances the scalability of Ethereum through its open source technology.
Performance: Base is tightly integrated with Coinbase, which provides direct access to over 110 million users and $348 billion in assets. This makes it easier for developers and users to get started. Recently, Base surpassed Optimism to become the second largest second-layer solution in market dominance.
3）Optimism
Technology: Optimism also uses optimistic Rollup, but adopts a single-round fraud proof system, which is simpler to implement than Arbitrum’s multi-round method, but the potential security may be lower.
Performance: Optimism improves Ethereum’s scalability by processing most transactions off-chain, using on-chain resources only for final verification. This reduces gas fees and speeds up transactions, although it is not as efficient as Arbitrum in terms of saving gas fees.
4）Blast
Technology: Blast focuses on ultra-fast transaction speeds and minimal latency. It uses optimistic rollups to combine speed and security. Blast's infrastructure is designed for high-frequency trading and gaming applications that require instant transactions.
Performance: Blast excels in speed and efficiency, by processing transactions off-chain, reducing costs and making it easier for developers to build applications and users to interact with them.
5）Line
Technology: Developed by Consensys, Linea is a flexible and developer-friendly second-layer solution that uses zk-rollups for scaling. Its advanced privacy features and interoperability with other blockchains make it ideal for enterprise applications and cross-chain functionality.
Performance: Linea is integrated with several major blockchains, enabling smooth asset transfers and smart contract interoperability between different platforms. The network is known for its high security standards and commitment to user privacy.
6) Risk and safety: factors to consider
While Layer 2 solutions bring tremendous benefits, there are also some risks and challenges:
Security: Layer 2 solutions rely on the security of the first-layer blockchain, but may introduce new vulnerabilities in their off-chain processes.
Interoperability: Different layer-2 solutions may not interact well with each other, potentially causing fragmentation of the ecosystem.
Liquidity: Moving funds between Layer 1 and Layer 2 can introduce friction, which can impact liquidity.
4. Bedrock Integration
How does Bedrock expand to major blockchain networks through cross-chain restaking? At Bedrock, our mission is to maximize the utility and profitability of DeFi through innovative cross-chain restaking protocols. We started with Ethereum's stablecoin uniETH to provide users with convenient liquidity restaking. Now, we have expanded our coverage to include Arbitrum, Linea, Manta, X Layer, and Karak, enhancing the scope and efficiency of our services. Here is a detailed introduction to our important integrations:
Dive deeper into Bedrock’s critical chains and integrations:
1) Ethereum
Re-mortgage: With uniETH, you can re-mortgage ETH on EigenLayer and earn returns without losing liquidity. EigenLayer has taken strong security measures to make the process smooth and low-risk, ensuring that your assets are safe and worry-free while working.
DeFi Integration: You can use uniETH on various DeFi platforms. Provide liquidity on Curve, or do yield farming on Pendle Finance. These integrations allow you to deploy uniETH in multiple strategies at the same time, maximizing returns.
2) Forget
Restaking: Partnering with Manta Network enables us to provide a privacy-focused restaking solution. Manta’s zero-knowledge proofs ensure high security and privacy, which aligns perfectly with our goal of secure and scalable restaking.
DEX Integration: By integrating with Manta’s ecosystem, we ensure that your transactions remain private and secure within decentralized exchanges. This provides a better experience for users, giving you peace of mind with every trade.
3) Decision
Rehypothecation: Launching on Arbitrum means cost-effective and efficient rehypothecation options. Arbitrum’s layer-2 scaling reduces gas fees and transaction times, making it perfect for everyday users like you.
DeFi Integration: Arbitrum’s vast DeFi ecosystem enables us to offer a variety of yield farming and liquidity pool opportunities. You can use rehypothecated assets in multiple DeFi protocols to increase your yield potential.
4）Line
Restaking: Linea is an Ethereum-compatible layer 2 network that provides a scalable and low-cost restaking solution. We leverage Linea’s infrastructure to provide high throughput and minimal transaction costs, which is critical for mass adoption.
Points Mining: We have integrated a reward multiplier into Linea’s ecosystem, allowing you to mine points efficiently. This system encourages active participation and higher interactions to reward you for your participation.
5）X Layer
Re-collateralization: Our integration with X Layer is an important step in cross-chain interoperability. By using Celer Network’s cBridge and Inter-chain Messaging Framework, you can bridge uniETH to X Layer, enhancing liquidity and utility.
DEX and LP Integration: Collaboration with Celer Network supports seamless cross-chain transactions. This integration extends to various DeFi applications, including decentralized exchanges and liquidity pools, expanding the scope of your application for Restaking assets.
6) rust
Restaking: If blockchains are like states in the United States, then Karak is the equivalent of the Federal Bureau of Investigation (FBI), providing comprehensive security. Karak provides a universal restaking asset security pool for new and existing protocols, avoiding the situation where each protocol needs to build its own security settings. You can restake a variety of assets such as Ethereum, stablecoins, and liquid restaking tokens.
Bedrock Integration: We recently integrated with Karak to leverage its Universal Restaking capabilities. This integration means you can now restake your assets on Karak, leveraging its strong trust network to improve the security of the protocols you care about while earning additional rewards.
7) Comparison of re-mortgage between Karak and EigenLayer
Advantages of Karak over EigenLayer:
Re-pledge mechanism: Karak allows you to re-pledge different assets, including Ethereum, stablecoins, and liquid restaking tokens, providing greater flexibility and reducing the risk of re-pledge a single type of asset.
Cross-chain compatibility: Karak’s universal rehypothecation infrastructure supports multiple blockchains, including Ethereum Layer 1 and Layer 2 solutions like Arbitrum and Optimism, as well as other chains, making it a versatile choice.
Incentive Mechanism: Karak’s unique incentive mechanism, such as Karak XP, Bedrock diamonds, and rewards for participating in the protocol, makes it attractive.
Advantages of EigenLayer over Karak:
Established Network: EigenLayer is already well-established in the Ethereum ecosystem, providing a trusted environment for Ethereum-based projects.
Ethereum Focus: EigenLayer is focused on Ethereum and provides highly specialized solutions on the Ethereum network, which can be an advantage if you work specifically in this ecosystem.
Points Mining and Reward Multiplier:
Bedrock provides incentives for re-hypothecation through an innovative reward mechanism:
Bedrock Diamonds: Earn Bedrock Diamonds by restaking uniETH on supported chains. Our rewards system includes multipliers that can increase earnings on uniETH by up to 5x and uniBTC by up to 21x.
EigenLayer Points: Earn EigenLayer Points by actively participating in Restaking activities. Participate in various protocols, maximize your rewards, and make the most of your re-collateralized assets.
8) Beyond cross-chain re-collateralization: integration with decentralized exchanges and liquidity pools
We are expanding our services beyond traditional Restaking through integrations with decentralized exchanges and liquidity pools. Here are some examples:
Ethereum: Our integrations with major decentralized exchanges like Uniswap and Curve enhance liquidity provision and trading. This gives you multiple ways to deploy your rehypothecated assets and increase their utility.
Arbitrum and Linea: We leverage the low cost and high speed of these layer 2 solutions to provide efficient trading and liquidity options, ensuring you get the most out of your assets.
X Layer: Our collaboration with Celer Network ensures strong cross-chain interoperability. Use Restaking assets in various DeFi applications and benefit from X Layer’s low-cost, high-performance infrastructure.
