Bankless: In addition to the "Big Four", what are the next-generation L2?
Original Author: Ben Giove
Compilation of the original text: The Way of DeFi
Original Author: Ben Giove
Compilation of the original text: The Way of DeFi
Dear Bankless veterans, cryptocurrency has always been on the path of continuous development. When a technological innovation takes the lead, other projects and technologies will only follow in its footsteps.
That's what we're seeing with Layer 2 networks now.
While names like Optimism and Arbitrum are well known in cryptocurrency, there is a whole new generation of second-layer technologies ready to challenge the established ecosystem.
This also means that the second-tier network is no longer synonymous with the Big Four.
Ethereum’s Layer 2 (L2) ecosystem continues to experience rapid growth. At present, the total lock-up volume in the twenty-two second-layer network projects has exceeded 4.36 billion US dollars, which is an increase of 1194% compared with a year ago.
As the saying goes, where there is growth, there is competition. As people pay more and more attention to this track, the competitive landscape within the second-layer network ecosystem is also intensifying.
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Total lockup on Ethereum’s Layer 2 network — Source: L2 Beat
So far, most of the discussion around Layer 2 networking has focused on the "big four" common rollups. These include Optimistic Rollup (ORU) in Optimism and Arbitrum, which are now live and have rapidly growing user and developer bases.
The Big Four also include zkSync and zk-rollups (ZKRs) in StarkNet. While their performance is high, neither is at the level of their ORU counterparts (more on this next).
Fuel
However, there are already some second-layer networks on the market, and although these projects are not well known at present, they are waiting to disrupt the existing networks. Some of these networks introduce unique design choices and capabilities, while others are highly specialized for individual use cases.
Let's take a look at these low-key second-layer networks and see what the hype is all about.
Fuel is an Optimistic Rollup.
Fuel is unique in that it uses its own custom virtual machine, the Fuel VM, with smart contracts written in Sway. This means that unlike most second-layer networks, Fuel is not compatible with the Ethereum Virtual Machine (EVM), a factor that may hinder its further adoption.
Fuel also differentiates itself by using the UTXO model (the same as Bitcoin), rather than the traditional account-based model commonly used by Ethereum and second-layer networks. These unique design choices make Fuel highly performant, as the network is able to verify multiple transactions in parallel, rather than serially (one at a time) like other networks.
Compared with other second-layer networks, Fuel also has a better user experience. Users on Fuel do not need the 7-day withdrawal time like traditional Optimistic Rollup, but can use the atomic swap bridge to return the funds withdrawn by users back to the Ethereum mainnet within minutes. Additionally, traders can pay for gas in any token, not just ETH. Although like any second-layer network, the network still has to buy Ethereum block space to verify proofs.
Scroll
The first version (V1) of Fuel was launched in December 2020, and the focus of developers has recently shifted to work on the second version (V2) of Fuel. The Fuel Labs team recently launched SwaySwap, a decentralized exchange, on the developer network. Uniquely, assets on SwaySwap are fully native to Fuel, meaning they inherit the same functionality as native assets like ETH on Ethereum.
While Fuel's lack of EVM compatibility may put it on a slower growth trajectory, Fuel's capabilities and throughput relative to other ORUs should help it further attract developers and scale in the long run scope of use.
Scroll is a zk-rollup (ZKR) that develops zkEVM (Zero-Knowledge Proof Ethereum Virtual Machine).
zkEVM has the potential to fundamentally change the scaling of second-layer networks and blockchains as a whole.
Aside from the difficulty of implementing ZKR in production, a major barrier to adoption of the technology is its lack of Ethereum Virtual compatibility. Although ZKR performs better in terms of throughput and gas costs, each ZKR has to build unique developer tools and infrastructure from scratch due to its inability to easily integrate the Ethereum Virtual Machine into the zero-knowledge proof technology .
This is why many consider zkEVM to be the "killer" of layer 2 network scaling, as it allows ZKR to inherit the network effects of the Ethereum Virtual Machine while maintaining the same, high level of performance.
Aztec
While other competitors such as zkSync and Polygon (more on this below) are developing zkEVM, one factor that may make Scroll compete with these projects is that it aims to be equivalent to the Ethereum Virtual Machine. This means that contracts deployed on the Ethereum mainnet can be ported to Scroll without any substantial changes to the codebase. This should help foster further adoption of Scroll, as it greatly reduces the difficulty of migrating projects to the web.
Scroll is currently taking the first steps toward realizing this potential, as it recently announced plans to launch a pre-alpha test network where users will be able to transact and try out individual applications.
Aztec is a privacy-focused zkRollup.
Aztec provides users with privacy through its unique transaction architecture. While the overall network is complex, at a high level this architecture functions similarly to the UTXO model and uses zero-knowledge proofs to transfer ownership of assets while protecting the identity of any parties involved.
One of the main use cases of Aztec so far is decentralized finance with privacy properties through Aztec Connect.
Aztec Connect provides users with the ability to directly interact with smart contracts deployed on the mainnet, which are deployed within the second layer network. This means that users can inherit the privacy of Aztec while also gaining the liquidity and composability of decentralized applications on Ethereum. Additionally, despite being able to interact directly with the mainnet, users of Aztec pay minimal gas fees because, like any rollup, Aztec's gas fees are still settled in batches and amortized across all traders. According to data from L2 Beat, Aztec Connect currently has a total lock-up of $3.12 million.
Immutable X
The most popular personal application of the project is zkmoney, a transaction shielding service. zkMoney enables users to conduct private transactions with various well-known mainnet protocols, such as Uniswap, Aave, Compound, Lido, etc.
As more applications build on the network, and the value proposition of cheap, private transactions becomes clearer, Aztec should continue to grow in this niche. It is worth mentioning, however, that in the short term, regulatory issues related to privacy projects may affect the further development of the second layer network.
Immutable X is a verification platform built with StarkEx.
Immutable X is considered a Validum because transaction data is stored through an off-chain solution called a Data Availability Committee, rather than fully on-chain. While this means that Immutable X has more trust assumptions relative to other rollups that settle to Ethereum, it allows for significantly lower transaction costs for a network that can fully subsidize end users.
Immutable X is governed by the IMX token. In addition to these rights, IMX holders can also stake their tokens to earn a 20% transaction fee, as well as a 2% agreement fee including all secondary NFT transactions on the second layer network.
Immutable X is focused on gaming, and currently has a number of high-profile projects on the network, such as Gods Unchained, an NFT-based trading card game, and Illuvium, an auto-battle game with AAA-quality graphics, currently in private beta.
Polygon zkEVM
Illuvium recently held a $3.3 million land auction on Immutable X, and the second-tier network has also successfully forged partnerships with notable brick-and-mortar companies such as Disney, Gamestop, and Turner Sports.
These partnerships, along with the public releases of Illuvium and other hot titles like Shimmer Sword and Guardians Guild, seem poised to further catalyze Immutable X's continued growth and adoption.
Polygon is developing a suite of ZKRs, the most prominent of which is the Polygon zkEVM.
Similar to Scroll, Polygon’s zkEVM was revealed a day before its launch, and it has the potential to fundamentally shake up the second-layer network landscape.
Like its competitors, Polygon’s rollup will be comparable to the Ethereum Virtual Machine, enabling developers to deploy their mainnet contracts to the second layer network nearly seamlessly. zkEVM will also leverage the Plonky2 validator system developed by Polygon Zero, another ZKR that was brought into the Polygon ecosystem following the $400 million acquisition of Mir. Plonky2 enables proofs to be verified with incredible speed, which reduces the time it takes for second-layer network transactions to reach finality.
zkEVM plans to launch its testnet sometime in the summer of 2022, and plans to deploy the mainnet in early 2023.
Polygon has a large developer and user base on its proof-of-stake (PoS) chain, and after acquiring other teams working on zero-knowledge proof technology such as Hermez, it has a lot of internal talent and continues to have high-profile partnership announcements , Polygon appears poised to be a force in the zero-knowledge proof ecosystem for the foreseeable future.
A world where multiple Layer 2 networks coexist
Between Fuel, Scroll, Aztec, Immutable X, and Polygon's zkEVM, and many others not mentioned in this article (there are many other second-layer networks outside of the "Big Four"), these projects seem poised for future Rapid development within a few months.
Fuel, Scroll, and Polygon's zkEVM are all general-purpose platforms that may lead to higher performance and a better developer experience relative to incumbents, while Aztec and Immutable X continue to advance in their respective areas of privacy and gaming implement.
We still don't know how things will play out and who will be the ultimate winner. But what is more certain is that for the foreseeable future, we will live in a world of multiple second-layer networks.Put your layer 2 networking knowledge to work by making
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