The development trend of the blockchain industry and obstacles hindering the advancement of base-layer technology have been the most discussed topics among insiders. The fundamental performance can hardly be improved without public chains. As far as we are concerned, back in those days between 2018 and 2019, thousands of public chains contended for market shares, yet many popular projects turned out to be a flop in the end. Only a few survived, but without much progress in terms of scalability, TPS, or security.
That’s why the Ethereum 2.0 upgrade draws so much attention. As we all know, the top public chain was upgraded in response to issues such as poor scalability, high gas fees, and unsatisfactory on-chain performance. After the DeFi boom, in particular, the frequent on-chain interaction threw Ethereum into endless congestion: hundreds of thousands of transactions were left to be verified at one point in black swan events, pushing the gas fee upward to a staggering 500Gwei. As a result, tech geeks started to focus on the Ethereum scaling, mainly in two ways: scaling the base layer itself (Layer 1) or scaling the network by offloading some of the work to another layer (Layer 2).
The on-chain solutions look to modifying or optimizing on-chain parameters, block size, and other information. Another major solution considers changing the development path of the chain or even the consensus mechanism at the center of the public chain — that is precisely what Ethereum 2.0 intends. But it’s progressing slowly due to the unprecedented technical difficulties involved.
Some have also proposed to scale the network by offloading some of the work to Layer 2. To better understand the abstraction, let’s look at the example of a central bank and local commercial banks: the main chain is akin to a central bank, which finds it difficult to process massive accounts in a short period of time. So it needs to delegate the processing tasks to local commercial banks and then check the final results at the terminal. In this way, the local commercial banks share the workload of the central bank, while speeding up transactions.
Layer 2 functions as the local commercial banks to offload the main chain. For the time being, promising Layer 2 solutions include CTSI, LRC, POA, Matic, DOS, SKL, CELR, OMG, and Loom. In reality, various paths have been derived, such as the state channel (a solution proposed by Lightning Network and Raiden we’re familiar with), liquidity (involved in yield farming or DEX), side chain (e.g. RSK), anchored assets (e.g. Bitcoin-anchored WBTC, RBTC, and IMBTC), and Zero-knowledge Proof (ZPK).
Among the above Layer 2 solutions, the most noticeable is Loopring, whose latest version reinforces decentralized transactions and payment protocols. After the protocol upgrade, the network can handle up to 2,000 transactions per second. Loopring-based DEXs have seen their trading volume and DAU soaring day by day, and Layer 2 trading experience based on ZKRollup technology has been well-received among users. Recently, the Layer 2 AMM mainnet of Loopring has gone live. With constant upgrades and improvements in relevant features, DEX will shake off problems such as high gas fees, congestion, and delay, and can rival centralized exchanges in terms of performance.
Yet Layer 2 solutions also come with an inevitable problem: the payment and transaction fees in DEX. Especially when Uniswap’s daily turnover goes beyond $100 billion, such a large scale of users could escalate even the smallest issue into a hard nut to crack in sub-fields. What’s worse, that would even make other segments of DeFi suffer, such as yield farming and borrowing.
If Ethereum was the only one to consider Layer 2 scaling solutions, these solutions could face long-term stagnation. But now that many public chains show interest, including Nervos, Oasis Labs, and Polka, developing Layer 2 solutions has become the consensus of part of insiders, and such a consensus, as it grows, will drive numerous geeks to tackle the problems in the solutions, such as the poor user experience and lack of reasonable incentives for users to experience and interact, as suggested by many. One telling example is the blockchain, which has risen against disapproval and doubts all the way and survived industrial fluctuations and the test of time.
No comments:
Post a Comment