Multi-angle understanding of Layer 2 ecology: concept, expansion plan and representative projects
Data Sources:
Data Sources:Footprint Layer 2 Dashboard（https://footprint.cool/1ypO）
According to the latest data from Footprint Analytics, the total locked volume (or TVL) of Ethereum Layer 2 in the fourth quarter increased by 600% compared with the third quarter, breaking through the peak value of 7.17 billion US dollars on November 25. As of now, the highest TVL is Arbitrum ($2.4 billion), followed by dYdX ($980 million),Boba Networkimage description
Footprint Analytics:Layer 2 TVL
Footprint Analytics:TVL Share by Layer 2 Protocols
first level title
The concept of Layer 2
In the case of increasing data and network congestion, the concept of Layer emerges spontaneously by expanding capacity and alleviating the current pressure. Layer 2 is an overall expansion solution to improve the performance of the Ethereum network (Layer 1).
The expansion of the blockchain is mainly divided into two directions: Layer 1 and Layer 2
Layer 1: Improve the public chain itself to improve performance, that is, on-chain expansion, including increasing block size (or data structure), sharding technology and isolated witness, solutions that can improve transaction processing capabilities;
Layer 2: Instead of directly changing the rules such as the block size of Layer 1 (the main chain), a second layer under the chain (Layer 2) is built, including state channels, side chains, Plasma and Rollup, in the second layer processing part Transactions share the pressure of the main chain, and interact with the main chain when necessary, that is, off-chain expansion.
What is the connection between Layer 1 and Layer 2? They are like the relationship between the parent company and its subsidiaries. Some transaction data requests on Ethereum are cross-chained to Layer 2 for processing. After processing, Layer 2 returns the transaction information and cross-chains to Layer 1, reducing the transaction pressure on Layer 1 and achieving low gas This is the main core technical point of Layer 2.
first level title
Layer 2 main expansion solutions
The early Layer 2 explored in the two directions of state channel and side chain, but in the process of exploration, it was found that the state channel cannot meet the privacy protection requirements of decentralization and anonymity, and the asset control of the side chain is under the chain , have a great hidden danger to asset security, so they are not the best expansion solution in Layer 2.
image description
Footprint Analytics:Layer 2 Network TVL Growth Rate
secondary title
Footprint Analytics:Layer 2 TVL Protocols(Latest Day)
1. Plasma relatively guarantees the security of assets, and the unavailability of information becomes an obstacle
Plasma is an off-chain expansion solution that relies on off-chain transactions with the least interaction of the main chain. It uses sub-chains to report to the root chain (that is, Ethereum) to increase transaction throughput (the number of requests processed by the system per unit time).
Plasma is one of the first Ethereum expansion projects that OMGX Network proposed the Layer 2 concept. Its working principle is as follows:
First build the Plasma chain outside the Ethereum, and the user transfers assets from the Ethereum to the Plasma chain. This process needs to send the main chain assets to the smart contract that manages the Plasma chain, and the assets can enter the Plasma chain for interaction;
Every once in a while, the operator on the Plasma chain (that is, the maintainer on the Plasma chain) will batch process the transactions within the time period and generate a block;
Operators on the Plasma chain will return the calculation results to the main chain and send the status of the asset transaction to the current owner of the asset.
The breakthrough point of the Plasma chain expansion solution is that it guarantees the relative security of assets. Even when the off-chain environment is unavailable, transaction results can be extracted on the main chain, thereby better improving the transaction throughput of the main chain; Interaction, lower transaction gas fee.
However, the Plasma mechanism is not perfect, and its problems are obvious:
Data not available. The main chain cannot obtain all off-chain data, and can only be verified simply through the root hash (a typical binary tree structure consisting of a root node, a set of intermediate nodes, and a set of leaf nodes);
The exit period is long. Due to the lack of availability of the main chain data, the exit mechanism is more complicated, and it takes a longer period to prove the fraud, resulting in a longer period of withdrawing funds, about 7-14 days;
Universal expansion is difficult. It is more difficult to limit the data structure of the sub-chain under the technical framework.
Representative project: OMG Network's expansion solution using Plasma
According to Footprint Analytics, the current TVL of OMG Network is 3.1 million US dollars, ranking 14th among Layer 2 projects. Compared with other projects, the volume is relatively small, and from the trend point of view, it is a stagnant project.
However, with the continuous emergence of new solutions such as Optimistic Rollup in the Layer 2 network, OMG Network's positioning direction has gradually weakened. By upgrading the brand and adopting the Optimistic Rollup expansion solution to return to the battlefield, it has gained more opportunities for development.
secondary title
2. Optimistic Rollup compresses on-chain transaction data, but the verification efficiency is low
Optimistic Rollup is a combination of Optimistic contracts and data availability on the chain. It chooses to believe in the authenticity of the transaction package submitted by the operator and imposes penalties on fraudulent behavior.
Its operating principle is that when the calculation result of Layer 2 returns to Layer 1, if the verifier believes that the result may be fraudulent, then the verifier can initiate a challenge, freeze assets on the main chain, and verify transaction data and records to prove that it is true transactions are fraudulent. In addition, if no verifier doubts the calculation result, the main chain defaults that the transaction is real.
This model improves the efficiency of chaining, packs multiple transactions, saves time and gas fees, has strong compatibility, reduces the workload of developers, and better solves the pain points of Ethereum network congestion.
Its disadvantages are:
The verification efficiency is low. Verifying the fraud proof mechanism requires a longer challenge period for asset deposits and transfers;
Funds may be frozen. If the verifier believes that the result is fraudulent, it is easy to freeze assets by the main chain;
The degree of expansion is not as good as ZK Rollup. Transaction compression is relatively low.
Representative projects: Arbitrum, Boba Network, multiple projects using Optimistic Rollup expansion scheme
secondary title
3. ZK Rollup is highly decentralized and difficult to develop
ZK Rollup improves scalability by centralizing the transfer of a large number of funds in a single transaction. Plasma creates a transaction every time a money transfer occurs, while ZK-Rollups bundles hundreds of transfers into a single transaction.
Compared with Optimistic Rollup, ZK Rollup has a higher transaction compression rate. Embodied in that it verifies the authenticity of the transaction package through zero-knowledge proof, the operator can convince the verifier that a certain assertion is correct without providing any useful information to the verifier. The specific operation is as follows:
The user transfers in and locks assets, and Layer 2 adds account asset information;
In the Rollup network, users sign and send transactions;
The operator collects transactions, packs them in batches, and generates zero-knowledge proofs;
The operator broadcasts the transaction package and zero-knowledge proof to the main chain;
The smart contract verifies the authenticity of the transaction package through zero-knowledge proof, updates the value, and executes the transfer operation.
Its advantages are:
achieve decentralization;
The chaining efficiency is high. Higher transaction compression rate;
High verification efficiency. No verification waiting period;
Better security and privacy. Zero-knowledge proof does not disclose transaction details, and ZK Rollup technology ensures that the data submitted to the main chain is authentic and valid.
Its disadvantages are:
The process of generating zero-knowledge proof is complicated;
Application customization development is difficult and has low compatibility.
Representative project: dYdX adopts ZK Rollup technology solution
image description
Footprint Analytics:dYdX TVL
Footprint Analytics:DYDX Token Price
secondary title
4. Validium is a hybrid expansion solution with low security
Validium is a hybrid expansion solution that allows users to choose between ZK Rollup mode and Validium mode. But unlike ZK Rollup, Validium's data is kept off-chain, while ZK Rollup's data availability is on-chain.
Validium may be more suitable for applications that do not require so much trust (such as game DApps), while ZK Rollup is more suitable for scenarios such as payments and exchanges that require higher security.
image description
Footprint Analytics:DeversiFi TVL & ImmutableX TVL
DeversiFi, claims to be the easiest way to get DeFi opportunities on Ethereum: invest, trade and send Token without paying gas fees, currently the largest decentralized exchange based on Validium, according to Footprint Analytics, on December 4 , TVL exceeded 100 million and hit a record high.
Summarize
Summarize
After years of updates and iterations, the Layer 2 expansion solution has realized a security solution for expansion on Ethereum, and alleviated the congestion and high gas fees of the Ethereum network. It has become the mainstream technical solution to solve the large-scale application of blockchain technology. Each solution has its own advantages and disadvantages, but each Layer 2 project develops corresponding technologies according to its own situation, so as to realize its maximum value.
Footprint Analytics is a one-stop visual blockchain data analysis platform. Footprint assisted in solving the problem of data cleaning and integration on the chain, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. Provide more than a thousand tabulation templates and a drag-and-drop drawing experience, anyone can create their own personalized data chart within 10 seconds, easily gain insight into the data on the chain, and understand the story behind the data.
The above content is only a personal opinion, for reference and communication only, and does not constitute investment advice. If there are obvious understanding or data errors, feedback is welcome.
This work is original by the author, please indicate the source for reprinting. Commercial reprinting needs to be authorized by the author, and those who reprint, extract or use other methods without authorization will be investigated for relevant legal responsibilities.
Footprint Analytics official website: https://www.footprint.network/
Discord community: https://discord.gg/3HYaR6USM7
WeChat public account: Footprint Blockchain Analysis (FootprintDeFi)
About Footprint Analytics:
Footprint Analytics is a one-stop visual blockchain data analysis platform. Footprint assisted in solving the problem of data cleaning and integration on the chain, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. Provide more than a thousand tabulation templates and a drag-and-drop drawing experience, anyone can create their own personalized data chart within 10 seconds, easily gain insight into the data on the chain, and understand the story behind the data.
