This article sorts out the ins and outs of ETH1.0, ETH2.0, and Layer2
Editor's Note: This article comes fromDecentralized financial community (ID: China_DeFi), reprinted by Odaily with authorization.
, reprinted by Odaily with authorization.
There are many articles on the Internet about ETH1.0, ETH2.0, POS, sharding, Layer2, zkRollup, Optimistic, etc., but they are often scattered. It is still difficult for non-technical readers to understand the overall relationship between these terms. Correlation, not to mention speculating on future possibilities and investment directions.
So I wrote this original content, hoping to clarify the connection between these words, and make some bold speculations about the next investment direction and project direction.
It is no wonder that most people think that blockchain and BTC are bubbles and air. Because the blockchain has developed from 2009 to the present, there are not many projects or protocols that have actually been implemented and applied. In summary, there are only three types:
BTC: has become a payment method that crosses regulation.
ETH: Supports efficient currency issuance financing for developers, replacing traditional long-term equity financing.
DeFi: ETH-based developers made a series of blockchain protocols that are really used by many people last year-decentralized financial protocols, such as decentralized exchanges, Uniswap in Q3 of 2020 At that time, the fee income has reached 67 million US dollars, and users have deposited about 43.52 billion US dollars in assets in the DeFi agreement!
In addition to constantly looking for real blockchain application scenarios, one of the core factors limiting the development of blockchain is TPS (the number of transactions per second). Ali’s TPS peak can reach 500,000, and VISA’s TPS is 45,000. , but ETH1.0 is currently only 15. On the one hand, the large gap shows that the fact that blockchain technology is still in its early stages also shows that blockchain technology has a huge room for improvement.
If the blockchain only needs to support fast transfers, TPS of the order of 100,000 may be enough, but if you want to support more assets and even human behaviors recorded on the chain in the future, then TPS needs to be challenged by millions or even Tens of millions of possibilities. So how has the technical solution been advanced step by step in the past few years? To what extent has it developed so far? Why did ETH2.0 and Layer2 receive so much attention this year? And how did EOS in 2017 and DOT at the beginning of this year want to impact the status of ETH?
Blockchain technology has mainly gone through three important stages in improving TPS:
Phase 1 plan: Increase TPS through block expansion, which can usually be increased several times. This parameter can be customized by public chain developers. For example, BCH changed the block storage space to 4 times that of BTC, thereby increasing TPS by 4 times. But the following problem, the cost of the mining machine has also been increased, so there is also a second-stage plan.
Phase 2 plan: Change the POW mechanism to POS, reduce the number of verifiers, reduce the cost of mining machines, and continue to increase TPS by a hundredfold. The number of validators corresponding to POW is thousands, and there are only 32 EOS nodes using the POS mechanism. The first phase of ETH2.0 has been launched, and the POW has been changed to a POS mechanism. But the problem comes again, the security will also decrease after the number of validator nodes decreases.
Phase 3 plan: Using sharding technology, the TPS can be multiplied and unlimited. What is sharding technology? To make a popular analogy, for example, for a very long transaction chain, the first 1/2 can be verified by some nodes, and the latter 1/2 can be verified by another part of nodes. Parts are verified separately, and N has no upper limit, so the TPS can be increased without an upper limit (this is not a professional explanation, just for easy understanding). At present, the first phase of ETH2.0 has also adopted sharding technology, and DOT has also adopted sharding technology in the cross-chain solution.
While the ETH mainnet has continuously improved the TPS from 1.0 to 2.0, it has also added the Layer 2 solution. The Layer 2 solution and ETH2.0 are advancing in parallel in terms of time:
Both ETH1.0 and ETH2.0 are the main network, which is Layer 1, and there will be many rollups on the main network as Layer 2. Our assets are on the ETH main network, and the "shadow tokens" on L2. The rollups of Layer 2 carry the function of "calculation", and the ETH main network of Layer 1 assumes the role of "verification". There is no communication between Layer 2, and Layer 2 will summarize the data and send it back to the ETH main network, and the real withdrawal will be completed on the ETH main network.
Rollup means summary, but what does it mean? Because in the process of data uploading to the chain, it is necessary to record transaction records and other data on the chain first (for example, A transfers 1 BTC to B), and the withdrawer B uses his own address to verify on the chain, and the verification is successful (B’s address is You can get the address of 1 BTC) B can withdraw the coins in your own account. In this process, rollup undertakes the function of calculating and summarizing many transaction records into a transaction result, and then rollup submits the transaction result to ETH On the main network, the main network saves space and can improve efficiency. After a series of transactions occur on the rollup, users can use their own addresses to complete the verification on the main network, and then they can withdraw coins.
Give a vivid example to illustrate the necessity of Layer2, and what is "calculation" and what is "verification"? For example, when UBI.city airdrops the token CITY to 92,000 addresses on the chain, the number of CITY airdropped by each address is different. If the format of "address, number of CITY" is used, more than 92,000 pieces of data are recorded in the On the ETH mainnet, on the one hand, the cost will be very high, on the other hand, it looks like a lot of garbage data to ETH1.0 with only 15 TPS. Therefore, when processing airdrop data, a work similar to rollup was done to aggregate 92,000 pieces of data into one piece of data, and then upload this piece of data to the ETH main network. After the verification is successful, you can receive the airdropped CITY amount corresponding to the address. Seeing this, you may be curious about how 92,000 pieces of data are aggregated into 1 piece of data? Here is a summary done using the Merkle tree and hash algorithm, and the Layer2 Optimistic solution is also a summary done in this way. More about the specific algorithm of Merkle tree and hash will be explained separately in the follow-up article system.
There are many technical solutions in Layer 2. V God, the founder of ETH, believes that Optimistic is a better choice to support contracts at this stage, but in the long run, zkRollup may be the future:
The figure below lists the performance of Layer 2's mainstream technical solutions, among which State channels (state channels, the Lightning Network before the BTC ecology is the state channel technology) and Plasma (plasma) have been denied by V God, and the current support is The highest ones are Optimistic and zkRollup, but currently only Optimistic supports smart contracts, and zkRollup will support them in the future.
Layer 2 rollup can support higher TPS because there are fewer validators. L2 needs to wait for the Withdrawal time before sending the data back to the main network, and users can withdraw coins on the main network. Users who trade on Optimistic’s rollup need to wait for 1 week before they can withdraw coins on the ETH mainnet, and users who trade on zkRollup need to wait for 10 minutes.
What speculative opportunities might Layer 2 bring? What kind of capabilities are needed for blockchain projects and teams?
Compared with DOT ecology and NFT, I personally think that Layer 2 is more likely to be a track for landing blockchain projects. When Layer 2 increases TPS and greatly reduces gas fees, it can support more large-scale user applications. Optimistic will be released this month (March), which will bring great investment opportunities in the Layer 2 field. The favorable application direction of this investment opportunity may be:
Layer 2 basic technical facilities: For example, the communication transfer protocol between rollups, users can transfer money from A rollup to B without going through the main network, and can be carried out directly. The need for more technical infrastructure solutions will be the focus of the imagination in the next article.
DeFi: At present, the gas fee for a transaction on Uniswap on the ETH mainnet is between 230 and 500 yuan (it can even reach 800 yuan), and the gas cost for depositing a liquidity is 0.4ETH (about 5,000 yuan). New users are immediately discouraged when they see this threshold; while on BSC, the transfer gas is about 0.6 yuan, and the gas fee for a transaction on Pancake is about 2 yuan. We can compare it in the transaction data of CITY. Within a week, hundreds of addresses completed about 800 transactions in Pancake's CITY/USDT currency pair, while the data on uniswap seemed very deserted. But as far as my personal trading experience is concerned, if the current DEX only has the AMM mechanism, it is not enough to support B-side behaviors such as market value management and quantitative trading, and this behavior is the main trading behavior in CEX. For another example, the low gas fee of Layer 2 is more likely to attract more small-amount and high-frequency transactions, but if the settlement needs to be returned to the main network, a gas fee of 410 US dollars will still be generated, so Layer 2 will need the cash out function. These are all places where DeFi can try after Layer2.
Social money: With the improvement of TPS, the blockchain can not only be used to record the transfer of assets, but also record complex human behavior on the chain, and the behavior on the chain may also become an asset (for example, Sesame Credit is Calculate a score based on our account behavior, so as to calculate our personal loan amount), and the imagination space in this field may be very broad. The complexity of human behavior is much higher than that of asset transfers, and there may be many births here. Technical solutions and decentralized product applications, such as UBI.city are trying to provide solutions in this field.
According to these speculations, we will find that the blockchain technology has developed to the initial stage of the application level, which may mean that the blockchain project team after Layer 2 not only needs to understand the technology, but also needs to have the ability to operate users, otherwise even if it is made After the technical solution is open source, it is easy to be forked by a team that is better at operation and then really promoted.
