Summary: Layer 2 solutions are transforming our approach to scalable blockchain architecture, especially within the Ethereum ecosystem. These technologies enable the processing of on-chain transactions off the main blockchain, enhancing speed and cost efficiency while upholding the security provided by the mainnet layer 1.
This guide presents a meticulously researched list of five leading layer 2 platforms significantly influencing Ethereum's network. Our choices reflect a comprehensive evaluation of crucial factors like user and volume growth, developer ecosystems, and the extent of decentralization.
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Best Layer 2 Networks
After evaluating over 15 Ethereum Virtual Machine (EVM)-compatible and non-EVM chains, we've identified the top five-layer 2 networks. These networks excel in network security, validator distribution, supported applications, user experience, scalability, and fees. They stand out for using advanced technologies like Optimistic and ZK-Rollups, which efficiently bundle transactions, or State Channels and Plasma, enabling off-chain transactions. These features position them as leaders in blockchain performance and reliability.
Arbitrum shines as the top layer 2 network on Ethereum, renowned for enhancing scalability and efficiency. It boosts Ethereum's functionality with batch-processed transactions, ensuring quicker, cost-effective operations. Notably, Arbitrum is distinguished by its robust security, full smart contract compatibility, and a vibrant DeFi environment, powered by the cutting-edge Arbitrum Nitro Stack, which includes Arbitrum Rollup and AnyTrust technologies. These advancements elevate throughput, reduce transaction costs, and maintain compatibility with Ethereum.
The platform's credibility is solidified by a significant Total Value Locked (TVL) of over $10 billion, reflecting strong user trust. Arbitrum's integration with leading applications like GMX and Radiant further cements its status in the Ethereum ecosystem. Its comprehensive product suite, including innovative offerings like Orbit and Stylus, firmly positions Arbitrum as a key driver in Ethereum's ongoing development, especially in DeFi and web3 domains.
Optimism, ranked second in layer 2 solutions for Ethereum, excels with its optimistic rollups technology. This feature enhances scalability and transaction speed by consolidating multiple transactions into one batch on Ethereum's main chain. Renowned for its robust security, complete smart contract functionality, and thriving DeFi ecosystem, Optimism has established a notable reputation.
Holding a Total Value Locked (TVL) of $5 billion, Optimism serves as a key DeFi hub, attracting a wide range of Ethereum community members. The recent Optimism Bedrock upgrade further strengthens its position, benefiting Optimism and other layer 2 solutions like Base and Worldcoin. These platforms efficiently implement the OP Stack, part of the Bedrock upgrade, to enhance their layer 2 capabilities. In turn, Optimism benefits by receiving a share of fees from networks using the OP Stack.
zkSync ranks as the third top layer 2 solution for Ethereum, leveraging advanced ZK technology to enhance Ethereum's throughput while preserving key values like freedom and decentralization. It's characterized by trustlessness, robust security, and community-driven ethos. zkSync focuses on hyperscalability, aiming to handle an unlimited number of transactions efficiently without impacting security or cost, a concept realized through its innovative ZK Stack and hyperchain framework.
zkSync's commitment to security shines in its ZK-rollups, specifically Era, which fully inherits Ethereum's security strengths. The platform's performance, with over 230 million transactions and 1 million+ contracts deployed, underscores its security focus and user-friendly approach. With a TVL of $130.21 million and partnerships with major projects like Chainlink, zkSync is at the forefront of blockchain innovation. Its solutions for cheap computation, storage, and unlimited throughput position zkSync as a pivotal force in making blockchain technology more accessible and scalable.
4. Immutable X
Immutable X stands as the fourth key layer 2 solution on Ethereum, specializing in scaling on-chain gaming and NFTs. Its Layer 2 zk-rollup technology efficiently eases Ethereum's load, boosting scalability. This is crucial for the rising demand for NFTs in Web 3 gaming, providing quick, secure NFT transactions, vital for smooth gaming experiences. Immutable X ensures transparent, immutable NFT ownership, fostering a fair gaming environment.
Focusing on speed, scalability, and flexibility, Immutable X is pivotal in Web3 gaming. It supports notable games like Gods Unchained and Guild of Guardians, demonstrating its impact on the gaming community. With features like carbon-neutral NFT minting, zero gas fees, and Ethereum-grade security, Immutable X caters to a wide range of gaming needs. Its partnerships with industry giants and support for various games underline its role in advancing Web3 gaming on the Ethereum platform.
Base, developed by Coinbase, emerges as the fifth-leading Ethereum layer 2 solution, harnessing the capabilities of Optimism's OP Stack. This platform, known for its affordability, security, and user-friendly environment, aims to broaden Ethereum's reach to a larger audience. It uniquely merges Coinbase's extensive user base with Optimism's cutting-edge technology, offering an accessible and cost-effective blockchain experience.
With a Total Value Locked (TVL) of $400 million and daily transaction fees averaging $28,799, Base has swiftly carved out a significant presence in the Ethereum community. It supports all EVM-compatible codebases, simplifying the transition for users from Ethereum L1 and other chains. Leading applications on Base, like Friend Tech and Aerodrome, are testament to its growing influence, particularly in the SocialFi and gaming sectors, highlighting the platform's expanding trust and adoption.
What is an Ethereum Layer 2?
A Layer 2 on Ethereum is a secondary blockchain network designed to alleviate the main chain's workload, enhancing transaction speed and reducing costs. It's akin to an efficient assistant who takes on a bulk of tasks from a busy boss (Ethereum), processing them separately but still seeking final approval from the boss.
Key Features of Ethereum Layer 2 Solutions:
- Sidechains: Independent blockchains with tokens and consensus mechanisms, linked to Ethereum via two-way bridges. They use a two-way peg system, locking assets on Ethereum and creating pegged assets on the sidechain for transaction processing. Once transactions are complete, the sidechain (e.g. Polygon) destroys its copies and unlocks the original tokens on Ethereum.
- Blockchain Rollups: This Layer 2 solution consolidates multiple transactions into one dataset for Ethereum, decreasing the required data space and lowering gas fees. It includes Optimistic Rollups, presuming transaction validity unless contested, and Zero-Knowledge (ZK) Rollups, using 'validity proof' for transaction authenticity. These variants both improve Ethereum's scalability and transaction efficiency.
- Plasma and State Channels: Plasma creates scalable, secure child chains linked to Ethereum, improving network efficiency. State Channels enable transactions off-chain with on-chain settlements, easing Ethereum's load. These solutions enhance Ethereum’s scalability and transaction speed, optimizing network capacity and user experience.
These Layer 2 solutions effectively address Ethereum's scalability challenges, offering faster and cheaper transactions while inheriting Ethereum's security. They play a crucial role in accommodating the network's growth, especially with the rising popularity of decentralized applications (dApps), decentralized finance (DeFi) protocols, and NFTs.
How do Layer 2’s Derive Security?
Layer 2 networks on Ethereum secure their operations using two main methods that involve the primary Ethereum blockchain (Layer 1). Firstly, they use special checks, known as Validity Proofs or Fraud Proofs, to ensure all transactions on Layer 2 are legitimate and free from any form of cheating, like creating coins from nowhere or unauthorized access to user funds.
Secondly, Layer 1 acts as a reference layer for Layer 2 transactions, allowing users to independently verify the accuracy of Layer 2’s activities or to safely move back to Layer 1 if needed. This is done by Layer 2 regularly sending a summary (state root hash) of its transactions to Layer 1.
The truthfulness of this summary is either confirmed by cryptographic proofs (Validity Proofs), or challenged by observers on Layer 2 using Fraud Proofs. The challenge period can vary greatly depending on the particular layer 2. These mechanisms help maintain trust and security in the system, ensuring that users’ assets are protected when they move between Layer 1 and Layer 2.
In conclusion, Layer 2 solutions are crucial in revolutionizing Ethereum's scalability, offering faster and more cost-effective transactions while maintaining the main network's security. Our analysis highlights five key Layer 2 platforms: Arbitrum, Optimism, zkSync, Immutable X, and Base.
These platforms enhance Ethereum's functionality, security, and user experience. With technologies like Optimistic and ZK-Rollups at their core, they effectively address Ethereum's scalability challenges. As the Ethereum ecosystem grows with dApps, DeFi, and NFTs, the role of these Layer 2 solutions becomes increasingly vital in shaping Ethereum's future and expanding its reach and usability.