Which Layer2 schemes did the DeFi project choose?
Original title: DeFi+Layer2 is trending, who is Layer2 more popular and what are the opportunities?
Original text: Jing Kai, block study society
DeFi is at war, and its leaders are fighting on another front. DeFi head players like Uniswap, Aave, Synthetix, etc. all started exploring Layer2. The reasons for DeFi's viability are obvious: Ethereum's sky-high gas charges, the unwary blocking of the network, and, critically, Ethereum 2.0 is officially available for any two or three years.
For DeFi applications, there are not many options: either choose another common chain multi-line warfare or use Layer2 on top of the existing one. The former might be worth considering for a new DeFi team, but DeFi veterans naturally prefer Layer2's solution: it's still familiar, the performance is improved several times, and the user needs little additional learning.
So what is the Layer2 Layer2 solution? What Layer2 options are available? Let's take a look at which Layer2 schemes the header DeFi projects have selected.
Layer2 capacity expansion plan: The main road is congested with a winding path leading to a secluded spot & NBSP;
Source: Block123
Ethereum's processing power, like that of a typewriter in the last century, can get stuck at the slightest mistake. To ensure that high-value transactions are prioritized, Ethereum deals are processed in the same order as Bitcoin: those with the highest price get the time of the transaction.
Ethereum USES a gas mechanism, where higher volumes cause gas fees to soar and small transactions are no longer possible: the fee for a normal transaction often exceeds the transaction itself. This is especially true in DeFi, since an operation in Uniswap or AAVE involves more complexity and, of course, higher fees.
Ethereum founder Vitalik said on Twitter: "Project parties and users should move to a Rollup type 2 network as soon as possible, which could be a trend for DeFi in the second half of the year." Vitalik also reviews other options. If it's just token money transfer transactions, LoopRing and OMG could also work.
The problems exist objectively, but the solutions are different.
Ethereum 2.0 USES the PoW mechanism to turn to NBSP; PoS mechanism migration, increased transaction throughput, coupled with a sharded transaction processing mechanism, is expected to significantly improve the status quo. But far from being enough to satisfy your thirst, Ethereum 2.0 has been upgraded and phased in, and by the time ethereum 2.0 fully supports sophisticated applications such as DeFi, your new little cutie may be ready to get some soy sauce.
The alternative, Layer2, which builds a second layer over the existing Ethereum network as an extended solution, became a more realistic and accessible option. Especially for DeFi, which is hot and eager to get more users, the reality is that for Top100.com, the transaction fee is just one more luxury lunch. But for retail investors, the high fees can be a high wall. This is one of the reasons why the rising DeFi on Ethereum is gradually spilling over into other public chains.
Layer2 is expected to give DeFi another shot in the arms with a sleeker trading experience and lower transaction costs. Of course, the Layer2 solution is not uniform. Each solution has its own advantages and disadvantages, which all depend on the choice of the project side. Now that you know what the Layer2 expansion plan is for, think of yourself as the project party: the banquet is open. What can You order from Layer2's menu? Each taste, but also see how to know.
Guys from Layer2, ready?
When it comes to Layer2, there is always a distinction to be made between the better and the worse. This article from & have spent Start with the requirements of DeFi application for Layer2 and see what Layer2 options are currently available. But limited to the author's knowledge and vision, it is hard to avoid too many subjective factors, but also ask readers to learn and criticize correct.
Let's start with a table.
Matter Labs has compiled a document that evaluates six mainstream solutions from four perspectives and 19 rules. As shown in the figure below.
Source: MatterLabs, Chinese translation: Jing Kai
Given the menu above, assuming you are the creator of DeFi, what type of Layer2 might be considered?
First, the DeFi application needs to support smart contracts, and preferably smart contracts with more flexibility.
At this point, State Channel and Plasma, if not necessary, are not a priority. Because their support for smart contracts is limited.
Secondly, the security of capital.
DeFi is an asset-heavy application, which means that the Layer2 solution needs to have better certainty and fewer risk factors if it is to be successful, and the DeFi creators have room to continue to improve the security of capital in other ways. Layer2 often needs to act as an intermediary with the help of a verifier, which brings man-in-man risk. Does the verifier have the right to freeze funds or even divide up the user's money? This is particularly important for DeFi.
According to MatterLabs, the two solutions SideChain and Validum are more dependent on intermediate verifiers, and DeFi needs to consider carefully when choosing Layer2. According to the evaluation criteria listed by MatterLabs in the figure above, the side chain scheme has a higher potential risk in terms of the risk of hot wallet leak attack and the risk of attack on the card design mechanism.
There are also reviewers who argue that SideChain's side-chain approach does not technically qualify as Layer2. Although SideChain solutions have such potential problems, SideChain is more flexible and has a wider range, so its specific security and practicality depends on the implementation.
It's important to note that although MatterLabs lists several mainstream solutions, the implementation is not an either-or. MaticNetwork, for example, is a layer-2 expansion scheme that combines Plasma with the side-chain scheme.
According to CoinDesk's August 3 report, MaticNetwork has created a $5 million DeFi Incubator fund to attract DeFi projects to create solutions on MaticNetwork, and has already attracted several DeFi projects. WazirX, India's biggest exchange, created AMM Swap DeFi on the Matic. Layer 2 & NBSP; based on Matic Network; DeFi Loan Agreement, also has EasyFi as an example.
Third, the Layer2 solution will, after all, address the issue of efficiency in asset processing.
This falls under the usability umbrella. The withdrawal time and whether the transaction can be confirmed immediately are two aspects worth paying attention to. Plasma and Optimistic Rollups scenarios show that the withdrawal time is expected to be longer, as shown in the table. However, if a liquidity provider is introduced, the corresponding withdrawal time will be greatly reduced, and DeFi schemes are currently designed with LP in mind, so the 1-week withdrawal time shown in the figure, although seemingly long, is only a theoretical estimate and the actual implementation time will be much less than that.
Finally, let's look at the performance aspect.
In the end, it's not that performance isn't important, but that's what Layer2's solution is all about, so the differences aren't that great. Whether based on ETH or ETH2.0, several Layer2 solutions can be significantly improved. The indicators in this regard are not of great reference value in excluding the Layer2 scheme. Of course, the evaluation perspective here is different, looking at Layer2 only from an implementation perspective.
To summarize, we initially evaluated different Layer2 solutions from the perspective of the DeFi project side, using the list summarized by MatterLabs. Taken together, the schemes of zkRollup and OptimisticRollup are relatively advantageous, while State Channel and Plasma, due to their limited support for smart contracts, are not the preferred options for DeFi.
ZkRollup and OptimisticRollUp are mentioned here for a brief introduction. We'll look at several DeFi projects that use the ROLLUP schema later.
Think of Rollup as a side chain because blocks are generated and snapshots are periodically taken to the ethereum main chain.
The reason why Rollup is favored by many project parties is inseparable from its efforts in de-trust: The Rollup scheme, which assumes that operators are not trustworthy, they will cheat, shirk off the chain, or fork and other malicious behaviors, is prevented by the Rollup scheme, so as not to affect the operation of the protocol. In addition to this, it is important that the node or verifier on the Rollup can exit immediately, as long as it is cooperative.
For space's sake, we won't delve into these two Rollup scenarios (ZkrollUp and OptimisticRollup), but let's see how Vitalik looks at them.
Vitalik's take on Rollup as a Layer2 solution
On September 2, Vitalik took to Twitter to discuss the trading supply and demand mechanism of Ethereum and some solutions to improve performance. In Mr Vitalik's view, transaction fees are high and can only be solved by expanding capacity. There are two types of performance improvements:
A rollup scheme
Fragmentation mechanism
Tether, Gitcoin, and other apps, chosen & NBSP; zkrollup The solution improves performance. Upcoming Optimistic Rollup solutions offer a more universal solution as EVM contracts are fully supported.
Optimistic and knowledge proof & NBSP; zkrollup You can increase performance by about 200 times, from 15tps to about 3000 TPS, by processing most transactions on Layer2. The gas charges on the chain are not reduced in this way, but since most of the transactions are in rollup, the actual cost paid by the user is reduced by hundreds of times. In the long run, there's also ethereum 2.0's sharding mechanism for performance and scalability.
Rollup: DeFi project preference selection
Above, we compared multiple Layer2 solutions and focused on the Rollup (Zkrollup, Optimistic Rollup) solution. Theoretically, ROLLup wins out over many alternatives, and from Vitalik's point of view, he himself sees rollup's solution as a realistic option for ethereum expansion.
Next, let's take a look at how the current hot DeFi projects, such as Uniswap, AAVE, Synthetix, and others, plan to apply the Layer2 scheme to improve performance.
Synthetix's Layer2 scenario: Using Optimistic Rollup, the test network entered its first phase
Synthetix is the first synthetic asset management and trading platform on Ethereum. Synthetix recently worked with the Optimism team to promote Optimistic Rollup on Synthetix to create a Layer2 solution that brings about a better user experience. Specifically, the underlayer relies on the OVM (Optimistic Virtual Machine) created by Optimism as the Virtual Machine that supports all of the Layer2 protocols.
On 25 September, Synthetix launched IFt's Second tier Expansion Optimistic network, allowing users to make rapid transactions on the second tier network. Pledgers with between 1 and 2, 500 SNX members are eligible to take the test and receive rewards. SynthetixDAO will offer 50,000 SNX per week as a collateral reward for participating in the network for a total of four weeks.
According to the Synthetix blog, using SNX on OE (Optimistic Etherum, which is the side chain that adopts the Optimistic Rollup scheme) is a critical step towards full scalability for the rapidly growing DeFi ecosystem, enabling anyone around the world to use DeFi without high gas costs.
In short, Synthetix USES an Optimistic Rollup solution for Layer2 expansion, and is doing well. The current phase is called Fomalhaut. In this phase, the aim is to test how to reduce the cost of SNX small mortgage payments. It is expected that the second upgrade named Deneb will be carried out on September 29 to reduce the gas cost.
Unipig: When Uniswap meets Layer 2 amplification solution & NBSP;
Uniswap is developing its V3 version. Hayden Adams, founder of Uniswap, tweeted that V3 will "fix everything," and some commentators have suggested that Uniswap V3 will implement Layer2. But officials have given no further details.
As an example demo of Uniswap Layer2, Unipig's solution was already online in October 2019, demonstrating the basic operation of Uniswap + Layer2.
Unipig, like Synthetix, has adopted an Optimistic Rollup solution to scale, demonstrating the UX improvements that are possible with Layer2. It was created jointly by Uniswap and Plasma Group.
In the current Demo, Layer 2 recharge and withdraw functions have not been implemented. Instead, they test tokens by dropping them in the air, allowing users to participate. Unipig has a statistics page that lists the performance improvements that the current solution for the Demo USES OR: NBSP;
AAVE: Layer2 will be used, but the details are unknown
AAVE, the popular asset lending DeFi platform for Ethereum, currently tops the list. Last month, AAVE said that "aTokens", the interest-paying token used to represent encrypted mortgage assets on its platform, would be integrated with Ethereum Improvement Proposal (EIP) 2612, allowing the licensing implementation to consume no gas.
In the case of the DeFi application on Ethereum, it is often necessary to initiate a transaction authorization in advance to allow the next action. And AAVE says that the team is actively studying to bring aToken into the Layer2 scheme.
Compound: Consider switching to Layer2 or other common chain
On Aug. 21, David Kajpust of the Graph team said on Twitter that the Compound was secretly considering moving to Layer 2 or another public chain because of the high cost of Gas, according to BlockBeat.
So far, there have been no further reports indicating the specific course the Compound will take. But as a Compound copy, EasyFi, mentioned earlier, serves as an example of what a Compound + Layer2 experience can be.
According to the EasyFi blog, EasyFi is a universal layer 2 digital asset lending protocol. DeFi system built on the Matic network. The Matic network was launched on 31 May 2020, and Plasma was adopted as the extension scheme. EasyFi aims to focus on credit agreements that allow borrowers easy and reliable access to a wide range of credit assets.
EasyFi started out as a bifurcation of Compound Finance, V1 moved from the main chain of Ethereum to the Matic network, implementing a secured loan agreement based on Layer 2.
Curve: Layer2 scheme will be adopted in the future
On Aug. 17, Charlie from the Curve team wrote in a telegram group reply to a message from the group:
Layer2 solution and expansion will be used for Curve in the future, but it has not been completed yet. We know that high gas fees are unfair to retail investors, and for us, at least for me, it is frustrating.
summary
From this article's analysis of several header DeFi projects, it is only a matter of time before the DeFi project adopts the Layer2 scheme. Although the full picture is not known, a number of Optimistic Rollup (or zkRollup can be considered among multiple Layer2 extension options) scenarios can lead to a preliminary conclusion that Optimistic Rollup (or zkRollup can be considered among multiple Layer2 extension options) scenarios that might be preferred by DeFi projects adopting Layer2.
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