Hello Everyone…

Welcome to another day of exploring Web3 Engineering. So long we have discussed on many talk topics and some of them are quite advanced as well. Today, let us get our fundamentals right and get a hold on what scalability solutions are available for blockchain networks and why do we need them. So, without any further ado, let’s get started.

What Are Layer 2 Solutions?

Layer 2 solutions are designed to enhance the scalability of Layer 1 blockchains like Ethereum, Bitcoin etc which are slower by nature, by processing transactions off the main blockchain. While a Layer 1 blockchain takes the responsibility of security and decentralization, Layer 2 handles transaction throughput, making blockchains more efficient without compromising on security.

There are 3 prominent approaches to implement the layer 2 in the market at the moment. They are

• Rollups

• State channels

• Side chains or Plasma chains

Do we really need these ?

As we can see that networks like bitcoin and Ethereum are growing day by day, issues with increased gas fees and finality time keeps increasing. Layer 2 solutions help networks to mitigate these issues, providing users with cheaper gas rates and faster finality while maintaining the underneath blockchain’s security and decentralization.

Let us dig a deeper into these. Shall we

Rollups:

Blockchain rollups are a scalability solution that processes and bundles several transactions off-chain before submitting them to the main blockchain, reducing congestion on blockchain networks.

Based on the technology that these rollups use to bundle the transactions, they are classified. Currently there are 2 approaches being followed by the market which delivered promised results. They are:

1. zk or zero-knowledge rollups

2. Optimistic Rollups

zk-Rollups

zk-Rollups bundle multiple transactions off-chain and submit a single proof to the ethereum mainnet. This ensures validity of the data on layer 2 without a need to expose entire transaction details to the layer 1. The "zero-knowledge" aspect allows for high security while significantly reducing data on Layer - 1. zk-Rollups allow for more efficient contract interactions by reducing gas fees and improving transaction speeds. Developers building dApps or DeFi products are increasingly implementing zk-Rollups to offer users a faster and more secure experience.

zkSync, zkEVM are the most popular implementations of zk-rollups

Optimistic Rollups

Optimistic Rollups also bundle transactions off-chain but assume all transactions are valid unless proven otherwise via a fraud-proof system. This means that disputes are settled by submitting fraud proofs to the Ethereum mainnet. Optimistic Rollups are simpler and cheaper to implement compared to zk-Rollups, making them ideal for applications that can tolerate occasional delays for security checks.

Arbitrum and Optimism are popular examples of optimistic rollup solutions.

State Channels

State channels allow participants to open a private channel off-chain and conduct multiple transactions directly between themselves, only recording the final state on-chain. This reduces the number of transactions processed on the main blockchain. State channels work well for use cases that require frequent, low-value transactions, such as micro-payments or gaming applications.

Raiden Network, Connext(now Everclear) are popular implementations of state channels on Ethereum network.

Sidechains

Sidechains operate as independent blockchains running in parallel to Ethereum or other Layer 1 blockchains. While sidechains handle transactions off-chain (layer 1), they periodically settle batches of transactions on Layer 1 to ensure security.

Polygon is a leading example of a sidechain solution that integrates well with Ethereum. Developers can build dApps on Polygon to take advantage of low fees and faster transactions, while still interacting with the Ethereum mainnet for finality.

Security Considerations for Layer 2

Layer 2 solutions inherit security from Layer 1 but come with some trade-offs. For example:

• zk-Rollups: Offer stronger security guarantees as they submit validity proofs to Ethereum, ensuring that the transactions bundled off-chain are valid.

• Optimistic Rollups: Rely on fraud proofs, which means there’s a potential delay if a fraudulent transaction is challenged, but they are more efficient due to fewer on-chain checks.

• State Channels & Sidechains: Provide enhanced speed and lower costs but may have weaker security models, as they rely on third-party validators or different consensus mechanisms.

How Developers Can Get Started

1. zk-Rollups: Platforms like zkSync and StarkNet are excellent starting points for developers looking to build dApps using zk-Rollup technology. Tutorials and documentation on these platforms guide developers on contract migration, zk-SNARKs, and verification mechanisms.

2. Optimistic Rollups: Developers can explore Arbitrum and Optimism, both of which offer robust developer tools, EVM compatibility, and seamless integration with existing Ethereum dApps.

3. Polygon: For developers more interested in sidechains, Polygon offers a well-documented SDK that simplifies deploying scalable dApps with high transaction throughput and low fees.

4. State Channels: Platforms like Raiden Network and Celer offer tooling for integrating state channels into dApps, particularly useful for applications that handle micropayments or gaming.

Hope you found this helpful!

Drop a comment if you want to chat more about it.