Current status of Ethereum Layer-2 solution

Original title: "the status quo of | ethereum layer-2 solution"

Source: Ethereum enthusiast

In the first article in our Layer-2 series, we discussed the extensibility solutions under the Bitcoin chain, as well as analyzed the Lightning network and various side chain solutions. As we turn to the second largest cryptographic currency (in terms of market value), we can see that Ethereum also has quite a bit of extensibility under the chain. Most of these schemes were proposed in response to the frequent congestion of the Ethereum blockchain in 2017.

The programmability of the Ethereum protocol itself allows developers to design extensions that are impossible with Bitcoin. In the past, this kind of programmability often meant nothing more than the creation of smart contracts, quick funding for teams (usually token in the form of ERC-20), and a full commitment to developing extensibility solutions. Several such schemes were launched a year or more ago, with little interest. The dismal performance was due both to falling markets and a drop in interest, and to their inability to build momentum before launching. By the end of 2019, however, the trend had begun to change. Market rebound, growing interest, increasing network utilization, and various technological advances have brought the Layer-2 project back to our attention.

- Average fee cost (usd) for Ethereum transactions in 2020 -

The increased usage of the Ethereum network, coupled with a tenfold increase in transaction fees, allowed teams to officially launch projects they had been working on for many years. We've seen -- there have been a lot of projects launched in the last few months, competing for community attention and acceptance. This article makes a chart of all of these projects, ready to look at their success (so far) from an investment perspective.

- The under - chain expansion scheme enters the white-hot competition stage -

Ethereum Layer-2 scheme classification

There are many Ethereum Layer-2 projects, and we classify them as follows:

The first category includes payment extensibility schemes, such as Raiden, Liquidity Network and Spankchain (based on Connext).

Most of the schemes use state channel technology, inspired by Bitcoin's lightning network. These projects successfully raised funds through ICOs in 2017 and early 2018.

The second type of scheme stems from the need for more flexible extension schemes (beyond payment).

These solutions can support any smart contract transaction and dApp, as well as DefI applications. Lead the way is NBSP; Plasma chain technology & NBSP; -- Eventually, a project including Loom Network, OMG Network and Matic was created. Because of the complexity of Plasma implementation (particularly data availability issues), a new class of common extensibility solutions is gaining traction: Rollup  Solution. This direction is pioneered by the ZK Rollup scenario.

The third type of scheme is not of the same dimension as the first two types of scheme, and the purpose is to add additional functions, especially privacy.

The most promising projects include Keep and Aztec.

Chain of general scalability solutions

Such solutions are the most active and discussed ethereum extensibility solutions available today. While the term "universal scalability" is technically inaccurate, it does reflect the goal of such a solution: to expand the volume of any Ethereum transaction, including smart contract transactions. This type of solution has a much harder problem to solve than a simple solution that implements downlink payments. From a technical perspective, such a solution can be called a "commitment chain" and can extend the throughput of any transaction. In this field, although many small classes can be subdivided based on different technical dimensions, we simply classify them as:

Plasma chain trade groups

- Compression scheme (Rollup)

In an abstract sense, a Plasma solution creates a space (outside of the main chain network) where arbitrary transactions can be performed. However, in a Plasma scenario, because the data from the transactions down the chain is not visible to the ethereum main chain, this makes the user think about NBSP; Leave & have spent Side chain, back to the ethereum main chain, you will have trouble. That's what's called NBSP; Data availability & NBSP; The problem.

- Simplified illustration of ethereum side chain -

On the other hand, the Rollup scenario can be considered a compression technique. Multiple transactions can be packed together to reduce NBSP; The size of the trading data, in turn, can be reduced by NBSP; Transaction verification burden, thus enabling Ethereum blockchain to handle more transactions. In addition, receipts from all transactions are stored on the Ethereum blockchain, which increases the security of Layer-2 transactions.

competition

In both of these small classes, there are different projects with different goals and different technical architectures. Detailed projects require several articles to be written, so we focus only on the broad items.

In fact, at least the current ZK Rollup schemes are not general purpose like Ethereum, they can only perform certain types of transactions and have to add code to perform more.

Plasma based solution

Plasma schemes are the first to emerge, marked by Vitalik's Plasma papers. Plasma implementations also vary considerably from one application scenario to another. The first product-level implementation of Palsma is a variation of Plasma used by Loom Network & NBSP; in 2018. Plasma Cash  I did. Plasma Cash focuses on non-homogenous tokens (NFT) and games. The project eventually left the Ethereum ecosystem to create a separate blockchain and shift to an entrepreneurial application. Loom is an interesting case study of the difficulties faced by the Layer-2 project, especially when the main application scenarios they are aiming for (like games) are not deeply tied to the ETH (as a financial asset). Two other projects, Matic and OMG Network have joined the 'Plasma in the production-Stage' club and have successfully started the main web. Both projects aim to expand GM's Ethereum deal. Matic USES a PoS consensus mechanism on the side chain (in return for tokens from their project). The OMG network resembles the Matic in orientation, but the current network relies on a fixed set of validators.

A Rollup plan & have spent

The Rollup extensibility solution is fairly new.

The Rollup scheme combines all transaction data & NBSP; In a packed/compressed form & NBSP; Storage on the Ethereum blockchain solves the data availability problem. The main purpose of consolidating transactions into groups is to save on validation costs. These groups of trades are not directly verified by the Ethereum consensus mechanism, but by another mechanism to prove the validity of these trades.

The Rollup scheme has two major subclasses: Optimistic Rollup and ZK Rollup, and different methods of validation.

Optimistic Rollup scheme using & NBSP; Fraud Proof & NBSP; To identify invalid trades and punish validators who allow them to pass. Zk Rollup USES zero knowledge proof, such as SNARKs, to validate the layer-2 transaction being processed. The proof itself is stored on the face along with the transaction data.

A major driver in the Optimistic Rollup (OR) field is Optimism. Optimistic Virtual Machine (OVM) is being developed with the intention of using Layer2 to extend any Ebarn transaction. Their team recently launched a demo extending DeFi with the Synthetix project. This demo is really encouraging. Another development OR force is IDEX's extensibility approach. The IDEX team also unveiled a demo of their solution last October. Another option, ZK Rollup, is intended to achieve greater scalability with Ethereum Layer-2 (higher Layer-2 transaction TPS).

However, the technology is limited to specific application scenarios, such as payments or exchanges, and is limited by the structural complexity of zero-knowledge proofs. There are two hotly contested projects: Loopring and Matter Lab's zkSync. Loopring started out using ZK Rollup to implement a decentralized transaction on Layer-2, and has entered the layer-2 payment domain and started Loopring Pay. But zkSync initially targeted the payment direction of Layer-2. They also recently launched a product.

Other scalability techniques

There are other extensibility techniques that do not fit into this Plasma/Rollup classification. An example is the Starkware team, which implemented an extensibility scheme that both put the transaction data down the chain (similar to Plasma) and used zero-knowledge validation to package the down-chain transactions together. Moreover, they used a zero-knowledge validation scheme called STARKs, which did not require trusted setup. Starkware and Vitalik call this solution NBSP; Validum.

Ethereum chain under payment scheme

Payment extensions were first proposed in 2017 and 2018, and both are deeply affected by Bitcoin's lightning network. These schemes are designed to extend the throughput of payment transactions, but do not allow arbitrary execution of smart contract transactions down the chain. Therefore, they do not support DeFi, dApp, and games. This is a fatal flaw in ethereum's ecology, and may be why such solutions have failed to gain traction. The main underlying technology Shared by these solutions is the state channel. Lightning, Connext/SpankChain and Liquidity Network are all trying to develop payment networks under the chain.

Thunder network

Raiden Network is considered to be the closest approach to lightning networks. Similar to the Lightning network, it also creates a micro-payment network running on Ethereum by implementing one-to-one channels between different nodes in the network. The first thunder network in the main network released in May 2020. Using Lightning Browser, you can see that as of this writing, there are only 25 accounts and about 50 channels on the network. Because the entire ethereum ecosystem has been largely drawn to more flexible expansion schemes, it is hard to believe that there is a bright future for peer-to-peer payment channel networks such as Lightning.

Liquidity Network is similar to The Lightning Network, and it also tries to realize the payment channel based on Ethereum. However, instead of following the lightning network and lightning network in the same one-to-one channel mode, they used the one-to-n channel mode. The network operates based on a payment center that everyone can connect to. Therefore, Liquidity is closer to the side chain than the payment channel network in terms of classification. The project is led by several academic researchers from Imperial College London, who are proud to present their research on the project's website. Launched on the main network in 2018, the project has been a flop in terms of attracting users, recovering only at a time when Ethereum usage and Gas prices are soaring.

Return on investment of token related to Layer-2 payment scheme -

Functional enhancement under the chain scheme

The final ethereal Layer-2 solution was created to implement functions that the underlying Ethereal Layer could not provide. One of the most popular features is privacy. Privacy includes hiding the amount of the transaction and completely hiding the address of the transaction. None of these privacy features can be implemented directly on the Ethereum main chain, requiring a separate Layer-2 solution. The two main projects in this area are Aztec and Keep.

Aztec's goal is to build a UTXO layer on top of Ethereum, using zero-knowledge proof to enhance transaction privacy. The project used an open, large-scale multi-party computing (MPC) ritual for trusted Setup and developed Zk. Money to allow the community to try out their product. Because these Layer-2 privacy solutions are not related to scalability solutions, Aztec team is working hard to combine the privacy enhancement technology and ZK Rollup technology stack to create ZK Rollup.

Similarly, Keep Network is developing a layer of privacy down the chain for Ethereum. The project doesn't want to do covert transactions. What it does want is to create storage space for private data (called Keeps), the kind that can be accessed and used through ethereum's smart contract. Keep was launched in early May 2020 to support the project's leading product TBTC. In our last article, we talked about possible alternatives to TBTC helping to expand the Bitcoin network. To achieve TBTC's high security, transactions are handled only by the Ethereum blockchain. However, there are no fundamental problems that prevent these transactions from being processed down the chain.

What are the risks of the multi-Layer -2 scheme?

On the Bitcoin blockchain, the Lightning network is a single layer-2 solution that provides a unified platform for many Bitcoin developers from different projects. The accumulated development work from projects such as Lightning Labs, ACINQ, Blockstream, Zap, Bitrefill and so on all converge into the same river. But in Ethereum, things are very different. The different Layer-2 extension methods are not compatible and there is a lot of friction and competition between them. This competition may also lead to ecological fragmentation, thus delaying or even hindering the acceptance of the Layer-2 scheme, so that none of the schemes can be widely accepted.

On the other hand, the widespread nature of experiments in ethereum ecology may mean that you can find really useful defences faster. A more scalable solution with better performance may end up beating even less efficient solutions.

There is some suggestion that creating underchain bridging between different layer-2 chains (i.e., bridging schemes that do not require a return to the ethereum main chain) can reduce the potential friction. This recalls the vision of Cosmos's interchain communication protocol (IBC). Downlink Bridges may be able to glue different Layer-2 projects together for greater scalability of the Ethereum network, however, most of these projects are still in their infancy and there has been little discussion of the Layer-2 bridge.

conclusion

The first wave of Ethereum Layer-2's extensibility solutions focused on payments, most of which were ICO funded and most of which failed. The price of the popular token, released between 2017 and 2018, has been falling as far as the eye can see. However, the need for extensibility solutions has only increased. This has led to the emergence of next-generation solutions (such as Rollup) that provide a more flexible framework beyond payment transactions. These solutions try to avoid the mistakes of their predecessors and evolve their solutions based on growing parts of the ecosystem, such as DeFi. Optisism and Synthetix's Demo and Loopring exchanges are stark examples of this trend. Because most of these projects have recently launched on the main web, it is too early to assess and predict where they will go. What's more, there is a strong competitive atmosphere among these projects, and some may walk away. A final consideration in evaluating these options is their compatibility with the Ethereum 2.0 roadmap. While a fully functional Ethereum 2.0 network may still be a few years away, solutions that are fundamentally incompatible with Ethereum 2.0 will certainly have a harder time attracting developers.

While no one can say for sure which Layer-2 solution will succeed, we hope this article will be a reliable guide to the projects that will help Ethereum become a more robust network.

I would like to thank Georgios Konstantopoulos, Jing Wang, Hasu, Tony Sheng and Anthony Sassano for their instructive feedback.

Text link:https://mp.weixin.qq.com/s/

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