Understand what layer 2 is

You've already come across this term "layer 2" if you're interested in DeFi. If you know Loopring, OMG or xDai, you may have even used it. It's even being talked about more and more because it marks a real turning point in blockchain design.

The first time that we really and very seriously started talking about layer 2, it was after the very big congestion of Ethereum in 2017. It was in fact at that moment that the question of the scalability of Ethereum was lacking and the challenge was then imposed.

Layer 2 was then designed to improve and enable the scalability of the blockchain. Essentially, it aimed to make it efficient for broader and denser use. What's important to understand is that scalability is precisely the fundamental challenge of blockchain.

In fact, to improve the scalability of Ethereum or all blockchains in general, there are actually only two possibilities. Either we seek to improve the blockchain itself (Ethereum attempts this with its version 2) or by creating another layer to unclog the first layer.

To give you a little idea, know that the most famous blockchains, namely Bitcoin and Ethereum, are so-called "layer 1" chains, original layers. This means that all transactions are therefore made on their network directly. And, as the name indicates with "layer", this means that we simply add an additional layer.

So now let's see what it is about in detail.

Context of the creation of Layer 2

As you may already know, Ethereum can process up to 15 transactions per second. Which is "low" especially since more and more people are entering DeFi every day and want to make transactions. Unsurprisingly, we see that Ethereum is slow, quickly becomes congested and the fees that go with it literally explode. We have all encountered this ultimate problem of having to pay fees higher than the transaction itself. This is clearly a major obstacle and it is the whole challenge of Ethereum to improve its internal system and its scalability precisely.

So, to show you a little of the impact of this, let's take the case of the 15 transactions per second that Ethereum can currently process. With a layer 2, we could - depending on the solution chosen - go to 4000 tx/sec. Which is a huge leap, right?

And, if you are wondering what this is for since Ethereum will move to its second version, just tell yourself that scalability on a very large scale (as is the objective) will necessarily have to involve the use of Layers 2 despite All. Yes, Proof of Stake and Ethereum sharding are certainly great progress but not sufficient given the scalability required and the size of a market which is growing ever larger (We would certainly need thousands or even millions of transactions at the same time). minute, let it be said).

Moreover, layer 2 solutions actually address several types of solutions. Some layer 2 solutions will improve the scalability of payments, while others will focus on smart contracts, and still others will focus on off-chain calculations.

However, the common point of Rents 2 is to move most of the operations off the chain and to use the main blockchain as an anchor to ensure the security of the network.

Scalability and scalability while guaranteeing the security of operations is in fact, generally speaking, the whole challenge that blockchain poses and that developers seek to resolve.

Understanding the “Blockchain Trilemma”

Vitalik Buterin formalized this trilemma by talking about the fact that a blockchain system can only have 2 out of 3 of the following properties:

• La security: An attack cannot take place if it has fewer resources than the state of the network as a whole
• La decentralization : the network as a whole and accessible to any participant actively working on the network.
• La scalability : The network can process operations on an ever-larger scale.

For example, we may naively think that we don't need a layer and that we should simply use more powerful nodes to improve transaction speeds. Yes, but by doing this, we somewhat compromise decentralization, among other things because very specialized nodes will be required (which would then necessarily be centralized).

It is a careful balance that must be found to improve the power of blockchains.

And in this context, one of the most ideal (or least worst) solutions that has been put in place is layer 2.

Now let's see what it's actually used for.

Using Layer 2

As we saw above, layer 2 will be an additional layer built and placed on top of the blockchain in order to improve its scalability.

It's also important to know that Layer 2 is a layer built on top of the first layer. It doesn't require any changes to the first layer. It can be built using existing elements, such as smart contracts, for example. Furthermore, and this is a common characteristic of Layer 2, it relies on the security guaranteed by Layer 1.

Layer 2 is another layer built on top of Layer 1. There are a few important points here. Layer 2 does not require any changes in Layer 1, it can simply be built on top of Layer 1 using its existing elements such as smart contracts. Layer 2 also leverages Layer 1 security.

Basically, layer 2 will increase speed and scalability while benefiting from the strong security of the main chain. Thanks to layer 2, we will be able to process thousands of transactions per second without affecting the functioning of the blockchain.

You should also know that there are several types of layer 2, each with a different approach to improving the network.

The different types of layer 2 existing today

Here is a small visual sample of all the solutions implemented:

Let's now see the best known and most used layer 2 categories. Some of the layer 2 solutions improve the applications created, others the payment channels, etc.

To make it clearer visually, nothing better than a few examples.

Channels.

With layer 2 Channels, you can perform multiple off-chain transactions, while only sending two transactions to the main layer of Ethereum for example. The results are low costs for higher throughput. However, to set up this layer 2? participants must deposit funds into a multisig contract. It is also necessary to constantly monitor the network to ensure the security of the funds. The two forms of channels are "state channels" and "payment channels". For payment channels, we can mention Bitcoin's Lightning Network which uses it extensively.

Raiden is a good example of a layer 2 solution to make Ethereum cheaper, more scalable and faster, for example.

Connext can be cited in this regard as a cross-chain liquidity network that allows fast and entirely non-custodial transfers between EVM-compatible chains and L2 systems.

Layer 2 Plasma type

You have certainly heard of it. In fact, plasma is a solution that was thought of by Joseph Poon and Vitalik Buterin. It is a framework that allows you to create scalable applications on Ethereum.

These are solutions which will use Merkle trees in particular to create an additional chain (Childchain) to the main blockchain. Childchains are copies of the parent chain. This is how transactions are faster and cheaper because we will offload operations from the main chain.

It was a real blessing that the invention of this type of layer 2 even if there are limits of course with plasma (as with all solutions, if we look at the details). The Plasma framework cannot support all transaction types. And, if the latter are too complex, it is not (yet?) possible. Delay times can be long and additional participants are also required to monitor the network and security of funds.

This type of solution was developed by OMG for example which implemented MoreViable Plasma. However, the most emblematic of all remains Polygon (formerly Matic Nerwork).

Moreover, we talk a lot about Polygon, as being one of the rare cryptos to have survived and even gained value during the terrible fall at the end of May 2021 (Musk announcement + Yet another Chinese announcement to ban cryptos) . This new light on Polygon is partly explained by the fact that it is configured to support different types of layer 2 such as ZK rollups, layer 2 optimist among others. A monster? It could well be, indeed.

Layers 2 of Sidechains type

This is perhaps the best-known form of Layer 2. Here, the sidechains operate separately (side: alongside) and independently of the main blockchain. In fact, they even have their own consensus algorithm. And to connect to the Ethereum blockchain, for example, they use what is called a bidirectional bridge (read the article on bridges on the blockchain ).

While interoperable, sidechains are compatible with the Ethereum Virtual Machine , but they remain limited. In fact, they are less decentralized than the main network. The primary problem stems from the fact that the consensus algorithm is not operated at layer 1; this opens the door to unscrupulous validators engaging in malicious activities.

A typical example of a sidechain is xDai. The xDai chain is a stable payment blockchain designed for fast and low-cost transactions. It uses a unique dual-token model: xDai is a stable token used for transactions, payments, and fees, while STAKE is a governance token used to support the underlying POSDAO Proof-of-Stake consensus mechanism. Similarly, the xDai Bridge allows for easy transfer of xDai to Dai on Ethereum. The tokenized real estate project RealT.co uses xDai to enable low-cost transactions.

We can also cite Skale (SKL token) which is also extremely powerful and allows you to create dAPPs in a simple way.

Rollups type layers 2

Here again, this type of Layer 2 is extremely interesting. The idea behind a rollup is to create a cumulative, aggregated transaction, wrapping several transactions into one. Rollups enable scalability by grouping sidechain transactions into a single transaction and generating cryptographic proof.

Here, rollups work by processing transactions directly at layer 2 while sending data to the first layer. With rollups, all transactions are handled in sidechains. The main Ethereum chain only stores transaction data. Therefore, we benefit from Ethereum's security while conducting transactions outside the first layer.

Even more, there are two types of Rollups:

Zero-Knowledge (ZK) rollups : Here, we group different transfers into a single transaction. These groups of ZK transactions are called SNARKs. It's a single transaction that is then sent to Ethereum. This allows for fast transactions because they are condensed, so to speak. StarkWare is an example of a ZK rollup solution . While ZK rollups are faster and more efficient than Optimist rollups, they don't allow existing smart contracts to easily migrate to Layer 2… This is currently the main obstacle with rollups. Perhaps one of the best-known examples is Loopring , with its exchange that operates on this system.

Optimist rollups : These operate on a sidechain running in parallel with Ethereum. Transactions are sent as call data. However, they can be vulnerable to attacks… The name Optimist rollups comes not only from the optimism of the system itself, but also from the company and project of the same name: Optimism.

Optimistic rollups will run an EVM-compatible virtual machine called OVM (Optimistic Virtual Machine) through which we can run the same smart contracts that can be run on the Ethereum network. This is a fundamental and really essential factor to understand because it is what allows us to maintain their “composability”. This is essential because smart contracts therefore maintain their strengths.

Layer 2 of Validium type

Finally, we can finish with Validium which is relatively close to ZK rollups except that there, the data is stored off-chain. We can carry out more than 10,000 transactions per second, without experiencing withdrawal delays. Validiums are known to have less risk of attacks but we cannot execute all types of smart contracts. Likewise, and this is again a small problem for this type of layer 2, this system requires very high computing power.

We can cite the DeversiFi exchange platform that we particularly appreciate on Zonebitcoin. You do not pay any gas fees to trade, exchange, swap your tokens thanks to Validium layer 2. Despite everything, and it is justified, you will have to pay for the first transaction (around $20 and also count the same fee for the withdrawals). That said, this remains a golden option for those who want to swap tokens without paying monumental gas fees.

Conclusion on Layer 2

So that's the main thing to know about layer 2, as you can see there are more and more solutions to improve the scalability of Ethereum. We can say, however, that the big trend remains on rollups, for the moment anyway. In addition, Rollups can be significantly improved with Ethereum 2.0. You should also know that there are more and more hybrid solutions between these different types of layers. We have mentioned here, to keep the article digestible, the most used types of Layer 2.

Moreover, with the implementation of Ethereum 2.0, combined with these layer2, we can consider that Ethereum is finally reaching its long-awaited potential.

See the video :

---

To buy cryptocurrencies (in a simple way) :

• Speaking on Binance (Complete crypto trading platform)

To generate interest on your cryptocurrencies:

• Speaking on Youhodler (Earn up to 12% interest)
• Speaking on BlockFI (Generate cumulative interest) 

To secure your cryptocurrencies:

• On the wallet Ledger 
• On the wallet safepal

To have fun and play 

•  The best for bitcoin sports betting
• Casinos and export: CloudBet