How Will Layer 2 Solutions Scale Blockchain Networks In the Future?
Blockchain technology is hailed for its decentralization, transparency, and security, has faced tremendous scalability problems. As adoption soars, the demand for more efficient, faster, and cheaper transactions has increased. The current bottleneck of many L1 (Layer One) blockchains like Ethereum, reinstates the need for more scalable networks that can support a wide range of Dapps (decentralized applications) without sacrificing security and decentralization in the long run. This is the problem that L2 (Layer Two) blockchains are trying to solve, they offer a promising path forward for scalability that will allow the industry to have mass adoption.
These solutions typically involve processing transactions off-chain and then settling them on-chain. By doing so, they reduce the load on the base layer, enabling the blockchain to handle more transactions per second (TPS) without compromising its core principles. Several Layer 2 technologies, including state channels, rollups, and sidechains, have been developed to achieve these goals.
Let’s Talk About Layer Two Solutions
The L2 protocols are built on the existing L1 blockchain infrastructures like Ethereum or Bitcoin. They help handle most transitions from the base layer, leading to increased efficiency, speed, and decongestion of the network. The ultimate goal of any layer two solution is to increase throughput without letting go of decentralization and security.
Layer 2 chains focus on processing transactions off-chain to make it faster and settle all transactions on-chain. All L2 transactions are settled on L1 chains at some point. For instance, all transactions on Arbitrum are settled on the Ethereum chain. By doing this, the burden on the layer one chain is reduced, and it can process more transactions per second without sacrificing its core principles. To achieve this goal, many solutions like sidechains, state channels, and rollups have been created.
What Is The Role of Layer 2 in Scaling Blockchain Networks
As blockchain technology experiences more adoption, there will be an increased need for scalable solutions. L1 chains are secured, but they struggle with high transaction volumes. This problem gave birth to network congestion, slow transactions, and high fees. Sometimes, the blockchain becomes unusable. Layer two, in the last 4 years, has brought a lot more efficiency to the blockchain industry concerning transaction processing.
State Channels
They are more useful for applications that require high-frequency transactions like games, and microtransactions like tipping. Bitcoin Lightning Network is an example of L2 that uses state channels. Most activities are kept off-chain, and this is what allows state channels to provide near-instant transactions and low fees. However, they have limitations like complex setups, and network participants are required to be online during the channel lifetime. Despite the challenges, this technology has increased Bitcoin’s utility and made it accessible to more users.
Rollups
Rollups have proven to be the most promising tech for L2 scaling solutions in the last 3 years, especially for the Ethereum blockchain. They bundle multiple transactions into a batch, which is later submitted to the L1 blockchain. Majorly, we have ZK (Zero-Knowledge Rollups) and Optimistic Rollups.
The former uses zero-knowledge proofs for the validation of transactions, making sure that it is done without disclosing vital information to anyone. ZK-Rollups are technically more secure than Optimistic Rollups. On the other hand, Optimistic Rollups validate all transactions on assumption and perform computation only if there is a dispute. This assumption reduces the computational loads on the network and gives room for higher throughput.
Sidechains
Sidechains are L2 that are independent of L1, they are connected to the main chain via a 2-way peg, which allows assets to move between both chains. Sidechains may be built to meet specific needs like higher throughput, and they can have different consensus mechanisms.
While sidechains can be scaled to any length, they have demerits. The security of the main chain does not cover sidechains, security of assets on sidechains depends on its underlying security architecture. Despite the problem, sidechains have been used successfully, for instance, xDai and Liquid Network are sidechains of the Ethereum and Bitcoin blockchain respectively. This technology continues to evolve and it could play an important role in scaling blockchain, especially for L2 that requires specific customizations.
What Is the Future of Layer 2 Solutions?
Most likely, the future of blockchain scalability is multi-layered, and L2 will play a crucial role as the technologies continue to evolve, they will prepare the ground for mass adoption.
Interoperability Between Layer 2 Solutions
The L2 chains do not have the means to communicate with each other yet, interoperability is one of the key issues in the L2 ecosystem, and users can not easily move assets from the Base chain to xDAI. There are attempts to build a bridge for Layer 2 blockchains, but none is ready for the masses.
To further scale these chains in the future and take advantage of the unique benefits of inter-connected L2 chain technologies, a bridge would be important. And it will lead to versatile and more robust blockchain infrastructures in the next decade.
Better User Experience and Mass Adoption
Building and deploying decentralized applications on Layer 2 is not different from Layer 1, at least from a technical perspective. For L2 solutions to be accepted globally, they need to be user-friendly and accessible. Game and DeFi (Decentralized Finance) developers must be encouraged to build more intuitive interfaces and make it easier for all users to use the Layer 2 solutions regardless of their technical backgrounds.
Security Concerns and Decentralization
As Layer 2 becomes popular among users, ensuring decentralization and network security is important. While diverting transactions to L2 has improved scalability, it has created another form of risk. The new challenge is building a Layer 2 blockchain that will not jeopardize the security of the underlying blockchain. Some projects are considering the possibility of incorporating a decentralized governance mechanism to enhance security.
The best L2 must maintain the balance between decentralization, scalability, and security.
Final Thought
The Layer 2 solutions are the best thing that happened to both Bitcoin and Ethereum blockchains, they have been able to offload transactions from the main chain to ensure scalability. These technologies will play a huge role in supporting a wide range of dApps and enable mass adoption. The future is bright when interoperability is thrown into the mix, L2 chains will power the next phase of the decentralized internet.
About the Author
Oladotun Wilfred Akangbe is a blockchain community growth hacker with half a decade experience in building community for Solana, Dash and so on. Follow him on X (formerly Twitter) for more incredible updates on blockchain technology and it uses.
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