The Ethereum network runs more than 2,000 DApp applications, large and small. The seemingly prosperous ecology is facing such a problem: the inefficient network makes the entire Ethereum ecology congested. From well-known DeFi projects such as Uniswap and Sushiswap, to Unknown applications such as Luck Vegas and Castle Buidl are all in a congested state without exception.
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1. The Ethereum network is congested, and the handling fee is unacceptable
On February 22, due to the violent fluctuation of ETH, the number of unconfirmed transactions on the Ethereum network exceeded 150,000, and the Gas Fee used exceeded 500 Gwei. Some transactions Gas exceeded 1,000 Gwei. Data shows that due to network congestion, the Gas Fee once soared to 1,900 Gwei , a record high.
At present, the average transaction fee of the Ethereum network has also soared to $30, which is more than 15 times that of 2018 and a record high.
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2. Layer 2 technology is gradually maturing, and it is time to start applying it
At present, there are two most promising technologies for Layer 2, namely Optimistic Rollup and ZK Rollup, and the latter is also a technology that V God is more optimistic about.
First look at Optimistic Rollup.
Optimistic Rollup was proposed by Consensys researcher John Adler at the Ethereum Foundation Research Forum in July 2019. It can increase Tps to 3000. Ethereum Layer 1 is better compatible with DeFi applications based on Optimistic Rollup.
Optimistic means "optimistic". The blockchain based on Optimistic Rollup tends to believe that nodes will not do evil, so the trust cost of Optimistic Rollup technology is relatively high. It takes 2 weeks for assets to return from Layer 2 to Layer 1 (ZK Rollup only takes a few minutes). Teams currently working on Optimistic Rollup include Optimism (formerly Plasma Group), Fuel Labs, Arbitrum, etc.
At present, this technology has entered the testing stage. On January 15, the Optimistic Rollup expansion program Optimism team launched the trial operation network of the Optimistic Ethereum main network. In the following month, the number of tokens pledged by Synthetix in the Optimistic Ethereum network has exceeded 6.62 million, worth more than 150 million US dollars.
Then look at ZK Rollup.
ZK Rollup was originally proposed by Barry WhiteHat, a senior researcher at the Ethereum Foundation, in 2018. It uses zero-knowledge proof to ensure the security of node verification. Its security is almost the same as that of Layer 1 (Ethereum). Blocks can be produced within one minute and Throughput increased to 2000Tps.
The disadvantage of ZK Rollup is that the current Layer 1 smart contract system supports ZK Rollup very little. DeFi application developers who use ZK Rollup technology need to develop special smart contracts to match Layer 1, and different DeFi teams develop ZK Rollup smart contracts are not universal. Projects implemented by ZK Rollup include Matter Labs and Starkware, among others.
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3. V God supports Layer 2, and Layer 2 is incorporated into the Ethereum 2.0 roadmap
As early as September 2020, Vitalik tweeted that "Hybrid routing opens the door for relatively rapid deployment of fully general Ethereum smart contracts in a 'quasi-layer-2' architecture. "
He also stated that he will use Rollup technology in the "phase 1" of Ethereum 2.0. Rollup here is currently the most mature Layer 2 technology on Ethereum.
In addition, in October 2020, V God issued an article "Ethereum Roadmap Centered on Rollup", calling for the current promotion of the infrastructure construction of ETH 1 to support Rollups, and establishing it as the key to the development of Ethereum in the short and medium term.
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4. Many leading DeFi projects are being developed based on Layer 2
1) Projects based on Optimistic Rollup (byOptimism)
Optimism's Layer 2 network "Optimistic Ethereum" has launched a beta version based on the Ethereum mainnet in January this year, and will open a wider community public test in March this year.
Synthetix: Layer2 has been launched
The first application to be launched on Optimistic Ethereum is the synthetic asset protocol Synthetix. Since its launch in January, nearly $160 million in assets have been migrated to the Layer 2 network. Due to its relatively early stage, the Layer 2 version of Synthetix currently only supports very limited functions, mainly covering mortgage minted assets.
However, Synthetix of the Layer 1 network is a full-featured DeFi protocol, covering transactions, derivatives, asset management (dHEDGE), etc., so it can be expected that when the Layer 2 version Synthetix can support all Layer 1 functions, the transaction volume and transaction scale of Synthetix will exist. Lots of room for growth.
Uniswap: will support Layer2
Uniswap has long stated that it is studying the Layer 2 protocol, and is focusing on the development of its V3 version protocol, trying to solve various problems that the community is currently criticizing. Uniswap is most likely to adopt Optimism's Layer 2 network, but the team has never given any expectations for the timing, but at least it should be at the same time as the Optimism public beta in March, or even later.
Volmex: will support Layer2
The Ethereum-based volatility index and non-custodial trading platform volmex.finance will integrate the Optimism layer-2 expansion solution to achieve cheaper and faster index queries and futures transactions. At present, the team has launched two volatility indices: Bitcoin Volatility Index BTCVIndex and Ethereum Volatility Index ETHVIndex, which track the 30-day expected volatility of assets.
The volmex.finance team has started development on the Optimism local testnet and will implement the public testnet and mainnet with the help of the Optimism team.
Saddle: will support Layer2
Saddle, an automatic market maker tool designed for price-anchored encrypted assets, announced that it is migrating smart contracts to the Optimism layer-2 expansion solution, but the specific details and timing were not disclosed.
2) Projects based on Arbitrum Rollup (by Off chain Labs) technology
The Arbitrum Rollup expansion network launched by Offchain Labs is a technology similar to the concept of Optimism, but they hope to improve the overall experience and efficiency through multiple rounds of interaction. Technically speaking, Arbitrum is compatible with EVM and Optimism, which is much easier than ZKRollup.
Judging from the information obtained by third parties and Vitalik Buterin, Arbitrum Rollup will launch the first public version in March as soon as possible.
MCDEX (Arbitrum Rollup): Layer 2 has been launched (beta version)
The first application on Arbitrum should be the decentralized contract exchange MCDEX. They started testing the Layer 2 version last year. Users can use MetaMask on the website for testing.
Earlier this year, MCDEX also wrote an article explaining why they chose Arbitrum Rollup. In their opinion, the Arbitrum solution has lower on-chain cost, higher technical maturity, and more developer-friendly.
Bancor (Arbitrum Rollup): will support Layer2
As one of the originators of the Automated Market Maker (AMM) concept, the decentralized trading protocol Bancor chose Arbitrum Rollup to complete the expansion, but the specific time and details were not made public. Bancor can provide spot trading functions for the early construction of Arbitrum.
Cometh (Arbitrum Rollup): will support Layer2
Cometh, a DeFi-based NFT game project, announced that it has selected Arbitrum Rollup as one of their expansion solutions. Recently, they have also cooperated with AaveGotchi in the side chain Polygon (Matic), so their games also support the Polygon network.
Augur: will support Layer2
Decentralized prediction market protocol Augur, one of the earliest projects in this space, has also announced that it will choose the Arbitrum network, although many details have not been made public.
DAOstack: will support Layer2
The decentralized autonomous platform DAOstack announced that it will cooperate with Offchain Labs, the Arbitrum Rollup development team of the Ethereum expansion program, to deploy the DApp Alchemy built on top of DAOstack on Arbitrum, the second layer network of Ethereum. However, many details have not yet been disclosed.
Many mainstream DeFi projects have deployed Layer 2, which shows that this technology deserves our attention.
