What is a Layer 2 Solution, and how does it work?
These are third-party protocols that work in conjunction with an underlying Layer-1 blockchain to improve transaction volume. Ethereum currently has 10 to 15 TPS (transactions per second). To grow Ethereum to Ethereum 2.0, it will need the assistance and support of Layer 2 technologies that can scale Ethereum’s TPS.
Why Ethereum?
Ethereum’s popularity has soared to the point where it is unable to meet demand. Even Ethereum 2.0 won’t be scalable enough in the long run, with roughly 3,000 DApps, over 200,000 daily transactions, and over 90,000 daily active users.
Take a peek at Coin98’s incredible visualization. These are some of the most popular layer 2 solutions for Ethereum, and I’ll only discuss the ones that have a chance of succeeding in the long run.
What are the many sorts of scaling solutions for Ethereum?
Layer 1 blockchains are Ethereum and Bitcoin. They use POW (proof of work), which consumes a lot of energy and is harmful to the environment. Additional electricity is consumed as computers conduct additional computational work. This is why Ethereum is working on transitioning into Ethereum 2.0, which will be based on a POS (proof of stake) paradigm, in which stakers must validate transactions.
These are some of the crucial Layer 2 solution technologies for ETH to move to ETH 2.0:
1-sidechains
2-plasma
3-Channels
4-Rollups
5-ZK-Rollups
6-Optimistic Rollups
You may learn more about these Layer 2 technologies by conducting some research on your own. However, I can give the following advantages and disadvantages:
Now that you’re aware of the various Layer 2 technologies in development, let’s compare which technologies have the highest TVL (total value locked) and, based on this information, I’ll discuss which technologies have a better chance of scaling to ETH 2.0:-
As you can see in this graph, optimistic and ZK rollup technologies are gaining traction, and I am confident that this trend will continue. In the future, I anticipate seeing a hybrid approach that combines the techniques mentioned above. For investing purposes, the top ten currencies in the chart above are the ones I’ll be keeping an eye on seeing which one will be used after ETH 2.0 POS is released.
Sources:
Disclaimer
This content contains an opinion and is solely for informational reasons. It is not intended to be financial or investment advice. Seek investment/financial guidance from a properly licensed specialist. I have no affiliation with any of the companies whose coins are referenced in this article. Please always conduct thorough research prior to investing, as you are solely responsible for any capital-related decisions you make and the outcomes.
