Hello and welcome back to the new weekly report from The Crypto Journal.
I think this one will be more than a 5-minute report, but here we are.
If you work in the technology sector, you know that scalability is a big word. Of course, this also applies in Blockchain.
🧪 What happened?
You will say: "But the Blockchain is a new and distinctive technology. It should be fast!".
The number of people using Ethereum has increased, and the Blockchain has reached specific capability constraints. This has caused the expense of operating the network, creating the need for "scaling solutions."
The decentralized design system of Ethereum is limiting the number of processed transactions to ... 15 per second.
More users + more transactions = high gas price + long delays.
The network is unaffordable for the mainstream (as one of Ethereum's goals is to enroll billions of users)
Network congestion: Not attractive to new developers.
💡 Solution 1 - On-chain scaling
Sharding: The method of breaking a database horizontally to spread the load. Sharding will ease network congestion and improve transactions per second by assembling new chains, known as "shards." Sharding is the future of Ethereum scalability.
💡 Solution 2 - Off-chain scaling
Sidechains: Independent blockchains that are Ethereum-compatible and operate their own consensus standards and block parameters to accurately process transactions.
Layer-2 scaling solutions. L2: A layer of the Ethereum network that can process transactions off-chain, reducing congestion on the mainnet. (This allows for more transactions, lower costs, and faster confirmation times.) : 🌡 Rollups, 🌡 Plasma, 🌡 State Channels.
These are L2 solutions that seem to be the most promising solution. Rollups commit the transaction execution beyond the main Ethereum chain, and they borrow the Ethereum security (bam, it's fixed). There are two types of rollups, and verification is the most essential distinction.
ZK-Rollups (Zero-knowledge rollups)
You have to get used to this complex stuff at some point, so, long story short:
Optimistic rollups rely on fraud proofs: a new state is assumed to be valid unless proof to the contrary (a proof of fraud) is submitted to the Blockchain within some timeframe. ZK-Rollup relies on validity proofs: a new state will always be presented to the Blockchain with proof that it is, in fact, valid.
Polygon (MATIC) - The top layer-2 scaling solution.
Gnosis Chain (xDAI) - Provides stability, scalability, and an extendable beacon chain framework.
Loom - Platform-as-a-Service (PaaS) blockchain solution that enables sidechain development for Ethereum-based applications.
Most of the projects use Plasma, a chain that is a separate blockchain anchored to the main Ethereum chain and employs fraud proofs to arbitrate conflicts (Learn more here). These chains are occasionally referred to as "child" chains because they are basically more miniature replicas of the Ethereum Mainnet.
Skale - Ethereum network that enables developers to bypass congestion on the mainnet by migrating development onto SKALE-administered sidechains
Loopring - assembles protocols, infrastructure, and user-facing products for the future of finance. Exchange & Payment protocol.
zkTube - a Layer 2 mining network for Ethereum.
zkSync - a trustless Layer 2 protocol for scalable, low-cost payments.
Aztec - scalable Privacy on Ethereum (Identity, code, transactions)
📡 New projects & Opportunities
Let's skip to the good part.
ImmutableX - The first Layer-2 protocol that focuses strictly on NFTs - Already partnership with OpenSea.
DeversiFI - DeFi on L2.
dydx - A trading platform on L2. Perpetual and futures exchange.
ZigZag - Decentralized exchange powered by ZK technology.
Plonky2 - Technology technology technology on Polygon
For a decentralized app, the choice of which L2 to enforce should be decided by the essence of the risk it is ready to expose its users to. These types include centralization risk, game-theoretical risk, technological and implementation risk, and, of course, adoption risk.