The crossroads of Layer 2, the new public chain war
In 2021, is there a definite opportunity for cryptocurrency investment?
If the answer to this question is yes, then I will give two answers, Layer2 and derivative DEX.
Regarding the logic of investing in Layer 2 and specific technical solutions, we have previously published"The wind rises OMG, who is the king of Layer2?" "There is a special discussion in , so I won't repeat it here.
The expansion of the Ethereum chain is not a new issue. It has been discussed for many years, and now it is time to face the challenge: the public chains of exchanges such as BSC and Heco are in full swing; new public chains such as Polkadot, Solana, and Near are ambitious; The pace of migration is still "a lot of thunder and little rain"...
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Layer2 duo
For a long time, V god has a soft spot for Rollup, and ZK rollup and Optimistic rollup have become the most concerned Layer2 duo.
Optimistic rollup, like the name, tends to believe that honest people will submit honest data, and if they are dishonest, they will be punished.
In terms of architecture design, Optimistic Rollup draws heavily on Plasma and ZK Rollup. It is generally a kind of middle-of-the-road thinking. It does not pursue extreme scalability, but weighs compatibility, allowing fully generalized smart contracts to run in Layer 2 .
This is the biggest advantage of Optimistic Rollup, which can be seamlessly compatible with smart contracts on Ethereum, greatly reducing the workload of developers.
The corresponding disadvantage is that the TPS improvement is limited, the exit from the network may be calculated in days, and data security is questionable.
Another rollup is V God's current favorite ZK rollup.
The advantages and disadvantages of ZK rollup are exactly the opposite of Optimistic Rollup.
The biggest advantage of ZK Rollup is that it is fast. ZK rollup uses zero-knowledge proof to achieve data security. When Layer1 interacts with Layer2, Layer 1 can easily trust the data from zk rollup and complete the verification directly on Layer 1, thus quickly Complete the transfer.
Correspondingly, the disadvantage of ZK rollup is that it is difficult to support general-purpose smart contracts. Therefore, it is not friendly to developers. ZK rollup developers need to independently develop smart contract modules, which is not only difficult, heavy workload, and difficult to copy and migrate, but This also brings a benefit. When a team actually develops and uses zk rollup, it proves that they have real technology.
To sum up, the comparison between the two schemes shows that zk rollup is fast and safe, but not compatible with smart contracts, which is not friendly to developers; Optimistic Rollup is compatible with smart contracts, which is beneficial to developers, but has low TPS and low efficiency.
Which of the two options is better?
In the short term, Optimistic Rollup has a lower threshold. The general-purpose EVM allows developers to get started quickly, so it is more suitable for current development and use; ZK rollup has a higher development threshold and is more suitable for fields that require fast payment. In the long run, With the development of ZK-SNARK technology, ZK rollup has more application scenarios and more stamina.
However, the answer to this question needs to be written by the project party. Whoever has the best technology is not guaranteed to win. Layer2 itself is fragmented. When there are more and more L2 ecological projects, it will also lead to strong competition due to network effects. stronger.
At present, various projects have begun to move in line.
For example, Synthetix and Uniswap decided to adopt the Optimistic Rollup solution.
In order to encourage users to migrate to Layer 2, Synthetix has launched an incentive plan. Users who pledge into Synthetix L2 can get SNX token rewards.
The much-watched Uniswap V3 version may also be migrated to Layer2. Uniswap founder Hayden Adams said on Twitter that V3 will "solve all problems."
As early as October 2019, Uniswap released a demo (example) of Uniswap + Layer2. According to the demo description, Unipig using the Optimistic Rollup scheme can achieve basically no Gas handling fee, and the throughput has been expanded to 200 tx/s, which is equivalent to 10 times the efficiency of the main network.
Tether is considering migrating ERC-20’s USDT to ZK Rollup’s Layer 2; the derivatives trading platform dYdX is using Starkware’s solution…
A key question, will the Optimistic and ZK development teams issue coins?
Of course, it’s only a matter of time. Alex Gluchowski, the founder of Matter Labs, has made it clear that he will release the governance token of zkSync, a layer-2 expansion solution based on ZK Rollup, and Offchain labs and Starkware will follow suit.
The latest news is that crypto venture capital fund Andreessen Horowitz (a16z) announced that it has led Optimism’s $25 million Series A round of financing and will launch a public-facing mainnet in March.
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The emergence of Layer 2 has broken the composability of Ethereum. Developers are faced with the problem of choosing sides. When different projects are deployed in different Layer 2 projects according to their needs and network of connections, their interaction costs will be greatly increased. In fact, The ecology of Ethereum has been split, forming an isolated island.
The concept of Layer 2 is not new, but from the perspective of token performance, tokens with the L2 concept have not been able to have a sustained big market, and most of them are short-lived. The main reason is that most of the L2 tokens still stay in the concept, followed by L2 There are too many disadvantages in itself, and the most criticized one is that it will form an isolated island and split the ecology of Ethereum.
The strength of the Ethereum ecosystem lies in the fact that enough assets have been deposited. Through the interaction between contracts, various types of DeFi products can be built together like building blocks, thereby stimulating innovation.
The emergence of Layer 2 has broken the composability of Ethereum. Developers are faced with the problem of choosing sides. When different projects are deployed in different Layer 2 projects according to their needs and network of connections, their interaction costs will be greatly increased. In fact, The ecology of Ethereum has been split, forming an isolated island.
In a short period of time after the L2 migration by the project party, isolated islands are inevitable, but if a certain solution is widely supported, it will intensify the pace of L2 migration and make users inseparable from L2.
From this perspective, Layer 2 is similar to rebuilding a public chain ecology relying on Ethereum. The Layer 2 war is essentially a public chain war. Generally speaking, it presents a situation of three-party melee.
The first is the war within Layer 2. The Optimistic Rollup and ZK rollup we mentioned earlier, as well as Offchain labs and Starkware will become the protagonists, and the focus will be on grabbing projects and encouraging migration.
In order to encourage migration, "liquidity incentive + L2 airdrop" may be the focus of the next stage.
The other camp is the exchange public chain camp headed by Binance Smart Chain (BSC) and Huobi Ecological Chain (Heco). The two benefit from the congestion of Ethereum, undertake the traffic overflow of Ethereum, and are compatible with Ethereum EVM. It is friendly to developers, and at the same time has the currency listing resources and traffic support of the exchange... Today's BSC and Heco have become network ecosystems that cannot be underestimated, and can even be said to be second only to Ethereum.
The current exchange public chain can be understood as a new Layer2.
Finally, there is the new public chain camp, headed by Polkadot, Avalanche, Near, Algorand, Solana, benefiting from the same logic, Ethereum is no longer a dominant player, capital overflows, the market needs new public chain stories, and these projects are also Compatibility with EVM is also robbing developers and users.
The three forces have both internal struggles and external fights. At present, the Layer 2 camp is not as strong as BSC and Heco. Compared with migrating to L2, the migration of projects and users to BSC is a more obvious trend.
Then, BSC and Heco have traffic, capital, and wealth effects; new public chains such as Polkadot have technology and ecology...Why do you think that Layer 2 is the most certain opportunity this year?
The answer to this question is, trust Ethereum.
Recently, the founder of Polygon (Matic) refuted the claim that Ethereum killers took the opportunity to replace Ethereum in an interview:
Ethereum is the most proven and secure programmable blockchain in the world, as the ultimate settlement layer and security source, no matter how much money you have, it is difficult to replicate the success of Ethereum, just like the entire digital country , are formed around Ethereum.
EVM has become the global standard for virtual machines, and it will take years for any competitor to achieve this. In addition to technical things, community and culture are also unique competitiveness, which is deeply rooted but hard to describe.
For example, some traders on The Defiant’s Discord channel stated that they are using BSC, but they plan to return to Ethereum as soon as possible when Ethereum’s Layer 2 solutions are more widely adopted in DeFi dapps.
At the same time, both BSC and Heco are not only a kind of competition, but also provide user education for investors to carry out Layer 2 migration in disguise.
For Ethereum, this is a war that it cannot afford to lose.
In the years when ETH2.0 is still being conceived and Ethereum is congested, Layer 2 is a life-saving straw, which is related to the future development of Ethereum ecology.
If L2 is successful, then the valuation of the Ethereum ecological project will be improved, and the story of the exchange public chain and the new public chain and the high valuation logic will be questioned, ETH TO THE MOON, L2 TO THE MOON.
Some people look forward to the former, some look forward to the latter, but in any case, in 2021, you have to pay attention to Layer2.
Some people look forward to the former, some look forward to the latter, but in any case, in 2021, you have to pay attention to Layer2.
