Ethereum, the world’s second largest cryptocurrency by market capitalization, has been grappling with its limited throughput of transactions and high gas prices. In order to alleviate these, Ethereum Layer 2 solutions have emerged as a possible solution for the enhancement of the performance and scalability of the network. Layer 2 solutions run on top of the Ethereum blockchain and aim to expand the capabilities of the underlying blockchain by offloading part of the processing of the transactions on secondary layers. By this, the transactions become less expensive and faster, and the security and decentralization of the underlying blockchain remain guaranteed. In this article, we will present a review of the most widely used Ethereum Layer 2 solutions, compare their security, scalability, cost, and user experience, and offer some advice on their usage.
Overview of the top Layer 2 Solutions for Ethereum
Some of the Layer 2 solutions that picked up momentum in the Ethereum ecosystem, with their own unique features and trade-offs, are the most popular solution, Optimistic Rollups, which implement a hybrid of on-chain and off-chain computation for faster processing of transactions. Another popular solution is zkRollups, which implement zero-knowledge proofs for batching many transactions into one proof, thus reducing the data required to be stored on the Ethereum blockchain. Plasma is also a Layer 2 solution that facilitates the development of child chains, allowing for cheaper and faster transactions by offloading some of the processing from the main Ethereum network. Other popular solutions include Validium, Arbitrum, and StarkWare, each of which has their own approach for increasing the scalability and throughput of Ethereum.
Comparison of Decentralization and Security
Comparing the security and the decentralization of the Layer 2 solutions of Ethereum, we should consider the interaction of each solution with the underlying Ethereum chain. Optimistic Rollups, for example, make use of fraud proofs for the integrity of the transactions, hence introducing some trust on the rollup operators. zkRollups, on the other hand, make use of cryptographic proofs for the correctness of the transactions with no trust on any given entity. Plasma chains also introduce some trust on the
operators of the child chain, but can take the security of the main Ethereum network with the assistance of periodic checkpoints. Note that even though Layer 2 solutions introduce some security and decentralization trade-offs when it comes to on-chain transactions, the security is still high compared with the traditional off-chain solutions.
On the decentralization side, zkRollups are likely more decentralized than other Layer 2 alternatives since they’re built on cryptographic proofs rather than trust in specific operators. But we must also consider the fact that decentralization is a continuum, and Layer 2 alternatives can strike a balance of performance and decentralization that varies. Ultimately, the security and decentralization of Ethereum Layer 2 alternatives will be a function of their design and implementation, and the incentives and governance arrangements for their operation.
Comparison of Scalability and Throughput
Throughput and scalability are critical factors when quantifying the performance of Ethereum Layer 2 implementations. High throughput, for example, can be obtained by Optimistic Rollups by batching a number of transactions into a rollup block, thereby boosting the number of transactions handled per second. High throughput can also be obtained by zkRollups by batching a number of transactions into a proof, thereby reducing the size of the data that would be stored on the Ethereum blockchain.
Assessment of Cost and Efficiency
Cost and efficiency also remain the primary considerations for evaluation of the cost of Ethereum Layer 2 solutions because these considerations directly affect the user experience and usage of the solutions. Optimistic Rollups, for example, can minimize the cost of transactions by batching multiple transactions into a rollup block, hence distributing the on-chain cost of the transactions across multiple users. Similarly, zkRollups can conserve on cost by batching multiple transactions into a single proof, hence conserving on the gas cost of on-chain verification. Plasma chains can also reduce the cost of transactions by offloading some of the processing on child chains, hence facilitating lower cost transactions than on-chain processing.
Besides cost savings, efficiency is also a key consideration when evaluating Layer 2 solutions. High efficiency can be attained by the Optimistic Rollups by batching numerous transactions into a single rollup block, thereby reducing the on-chain transactions’ overhead. High efficiency can also be attained by the zkRollups by batching numerous transactions into a single proof, thereby reducing the data needed on the Ethereum blockchain. Plasma chains can also be optimized for efficiency by outsourcing some of the processing on child chains, allowing for the parallel processing of transactions and reducing the traffic on the main Ethereum network.
Analysis of User Experience and Adoption
User experience and adoption will be critical for the success of Ethereum Layer 2 solutions because the simplicity of user interaction with the solution and the level of usage across the ecosystem will be determined by user experience and adoption. Optimistic Rollups, for example, will be able to provide a seamless user experience because users will be able to interact with rollup contracts using ordinary Ethereum wallets and tools. Similarly, zkRollups will be able to provide a user-friendly experience because users will be able to make transactions using ordinary Ethereum addresses and keys. Plasma chains will also be able to provide a smooth user experience because users will be able to deposit and withdraw funds from child chains using ordinary Ethereum wallets.
Aside from user experience, other considerations that also influence the rate of adoption are developer support and ecosystem integrations. Optimistic Rollups, for example, gained a lot of developer traction due to the fact that they can be used with existing Ethereum tooling and smart contracts. zkRollups, however, also gained large-scale adoption due to the fact that they can be used with existing Ethereum infrastructure and developer tools. Plasma chains also gained traction in the ecosystem due to the fact that they can be used with other Layer 2 solutions and can be integrated with decentralized finance (DeFi) apps, Best Ethereum layer 2 solutions compared.
Conclusion and Recommendations
In conclusion, the Layer 2 solutions for Ethereum offer promising ways of increasing the performance and scalability of the Ethereum network with the security and decentralization of the underlying network. Each Layer 2 solution offers its own trade-offs with security, scalability, cost, efficiency, user experience, and adoption, and the solution is selected depending on specific use cases and performance requirements. As the development of Ethereum continues and evolves, developers, users, and stakeholders of the ecosystem must examine and deploy Layer 2 solutions that best meet their needs. Based on the analysis, we recommend developers make use of Optimistic Rollups for high throughput and cost-efficient applications with a smooth user interface. Where security and decentralization become the priority but not at the cost of efficiency and scalability, zkRollups may be the solution.
