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Top Ethereum Layer 2 Networks


Ethereum ranks as one of the most popular blockchain networks in use today. There is no denying that the site regularly sees thousands of visitors utilizing its services. The total number of decentralized apps (or DApps) developed on the platform in mid-2020 neared three thousand. Additionally, the potential of Ethereum for boosting the Defi space also highlights the possibilities for a significant increase in the number of apps and users on the Ethereum platform.

The continual rising number of users on the network unknowingly resulted in the Etherum facing some limitations. Transactions on the blockchain take time to complete, regularly meet congestion and tout steep gas fees. These limitations were where Ethereum Layer 2 solutions entered into the picture. So, what are Layer 2 solutions and what are the top Ethereum Layer 2 networks on the net?

Overview of Ethereum layer 2 solutions

Despite how Ethereum is introducing sharding in ETH 2.0, the process is not ready for deployment. Hence, it is better to rely on Layer 2 solutions to conduct operations on the blockchain.

The name provides a significant amount of information about what they provide. Layer 2 is another network working above the leading Ethereum network. The Layer 2 solutions stay above the Layer 1 network through smart contract. Layer 2 can interact with the leading network and not rely on modifications to their base protocols. The Ethereum Layer 2 scaling solutions can provide additional functions like payment scalability and off-chain computation.

The need for Ethereum Layer 2 solutions

Ethereum’s popularity means that it faces more users registering on the platform. Additional users lead to an increased load on the network. Presently, the capacity for the network is limited, and the cost of using the network services increases. The higher rates come about as more users compete to add transactions to the network.

Hence, the Layer 2 solutions play a vital role in addressing issues relating to network performance. There are solutions for Ethereum scaling, testing, research and implementation, but these solutions remain in the development phase.

The goal of scalability in the Ethereum network refers to improving transaction speed along with transaction throughputs.  Also, these scaling solutions cannot compromise the network’s decentralized nature and security.

Ethereum also faces problems like steep gas fees and slower transactions. Presently, Ethereum provides two options through Layer 2 solutions and sharding. These solutions address the problems of high transaction fees, scalability and transaction settlement delays.

Notable Layer 2 networks

Since its launch, many Layer 2 solutions have successfully gained attention in the crypto world. Here are the notable layer 2 solutions that resolved several critical problems.

Polygon - It is an emerging platform meant to develop and connect Ethereum-based blockchain networks. It features all the tools and components used by developers to create optimized Ethereum instances. Also, the platform provides an improvement in flexibility for developers and the security of Ethereum. Polygon is steadily becoming the preferred Ethereum Layer 2 solutions provider and is seeing incredible market growth.

Arbitrum - It is another notable entry among the popular Layer 2 solutions providers for several reasons. Arbitum development has features meant for close interoperability with Etherum. These features make it easy for Solidity developers to cross-compile their smart contracts. The three components of Arbitum include a compiler, the EthBridge and validators.  Arbitum does not feature a native token and indicates that it is not interested in launching one.

Another highlight to Arbitum is that it supports sidechain aggregation of transactions or rollup technology.

Optimism - This is another example of famous Ethereum scaling solutions that provide improvements to transaction affordability. Also, it can ensure prolific improvements in transaction speed for Ethereum users. Developers here can create Solidity smart contracts with some limitations.

One of the striking highlights of Optimism is the direct collaboration with Synthetix. The platform announced it would provide staking options to users with SNX tokens.

Immutable-X - Immutable- X is the first Layer 2 scaling solution for NFTs on Ethereum. It provides instant trade confirmation, zero gas fees, impeccable scalability and provides this without compromising on user custody. The protocol operation on top of StarkWare’s proves the technology and allows users to retain Ethereum’s network and services.

X-Dai - is a sidechain based on Etherum and supports users in processing transactions at economical costs and faster speeds. The platform uses a PoS consensus mechanic to help users place native xDAI tokens as stakes on the networks. The most enticing part about xDAI is that it is a stablecoin.

The growth of the xDAI system comes about thanks to its integrations and partnerships with other platforms and projects.

Closing thoughts

Layer 2 solutions have the optimal solution for addressing the increasing load on the Ethereum network. Scalability acts as a promising requirement for the widespread adoption of a blockchain network. The lower transaction fees will encourage more users to start using blockchain.

The various Ethereum Layer 2 solutions here have immense potential to change the blockchain landscape beneficially. Hence, we see many blockchain development companies are integrating Layer 2 solutions into their development services. These solutions are the next best thing in providing resource usage of blockchain networks.


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This post is from a series of posts in the group:

Blockchain in Banking and Financial Services

This group is to share any information related to enterprise wide Blockchain technology adaption in different Banking Financial Services sub-domains.

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