The Layer2 track is about to explode and there are many players in it. Who will be the leader?

I still remember that when we first mentioned ETH expansion a few years ago, the first thing that came to mind was Layer 2, and in Layer 2, the first thing that came to mind was Lightning Network, State Channel, Plasma…

After a few years of struggling, they found that it was useless. Many project owners and investors could not wait any longer, so there were a lot of Alt L1 (alternative Layer 1), from the earliest EOS, Tron, IOST to the current BSC, Sol, Avax, Near, FTM...

Fortunately, Layer2 has finally found its direction. Rollup has emerged. Vitalik Buterin has directly set the tone: no more sharding or anything like that! ETH will go with the Rollup solution first!

Okay, let’s roll!

Then we naively thought that there would only be one Rollup solution, but later we found out that it was actually divided into OP series and ZK series. The saying "medium-term and short-term OP, long-term ZK" became popular in the industry.

But it’s not so bad. There is only one OP (Optimism) and two ZKs (Starkware and Matter Labs). There are three solutions in total. Okay, it’s acceptable.

Later, Arbitrum emerged, followed by Hermez and Aztec, OMG created Boba, Metis forked Optimism, and Polygon made a large number of acquisitions to create a Layer 2 package solution.

There are too many Layer2 projects and there are not enough...

Then a few days ago, Arbitrum released their side chain Anytrust, which has better performance and fees and security backed by Rollup. It can be regarded as half of Layer2. Since then, the gameplay of Layer2 has also begun to enter the explosive stage like Alt L1.

Let's analyze it below. Putting aside the dedicated Layer2 such as Lrc and the privacy-type Layer2 such as Aztec, there are currently many ways to play with the universal Layer2 alone.

01
Fake Layer2

Polygon has always claimed to be a Layer2, but except for its native currency Matic, which uses Plasma technology, other Erc20s all use sidechain bridges, so Polygon is still just a sidechain for now. This is one of the reasons why Polygon is often dissed in the technology circle.

But they are good at marketing and have a high market value, so they have money. Through various acquisitions in the past two years, Polygon is expected to transform into a chain with a package of L2 solutions in the future.

It’s not that we won’t roll, we just roll after a while.

02
Traditional Optimistic Rollup

The famous Arbitrum and Optimism should be known to everyone.

OP uses fraud proof technology to ensure the security of transactions. The DA (data availability) and settlement required by Rollup occur on ETH L1. This also means that although the current performance of the OP system is much better than that of ETH, it is still a long way from serving the Web2 population, and the cost is still relatively expensive (1-5 US dollars).

The advantage is that it has good compatibility and can be used now. Arb's L2 transaction volume and ecosystem also firmly occupy the top spot in the entire L2 world.

It is impossible not to know about the more well-known brands such as Starkware and Zk-sync.

The ZK system uses more advanced cryptographic proofs to ensure the security of transactions. DA (data availability) and settlement are also on ETH L1. If nothing unexpected happens, we should see the launch of these two star players this year.

As for performance, you have to see it to know it compared to OP. In theory, the difference should not be big. In terms of cost, it is definitely cheaper than OP, probably about an order of magnitude cheaper.

04
Castrated version of Zk Rollup

Starkware’s Validium and Zk-Sync’s Zk-Porter.

This is a solution that the two star players came up with for higher performance and lower costs, of course, at the expense of some security.

The method is that the settlement is still on ETH, but the DA is placed on its own POS node or committee (so that the original data does not need to be stored on ETH), in exchange for a significant improvement in performance. The fee can also be reduced by another order of magnitude. As for security, of course it will be one level lower than the traditional ZK-Rollup, after all, the DA is not on ETH.

But the advantage is that even if the nodes collude, your funds still cannot be stolen. At most, they will be frozen. Rollup is so powerful!

05
L3 & L4

The recursive Rollup proposed by Starkware uses the Starkware mainnet for DA and settlement, and then adds another layer of Rollup, with the final settlement recursively returned to ETH L1. In the future, Appchains such as IMX and DYDX will most likely appear as L3.

And according to this recursive model, you can also have L4, or even L5... In theory, the performance can be infinitely improved and the cost can be infinitely reduced. In the future, when blockchain is going to serve billions of people, it will most likely be based on this model.

06
Hybrid Rollup

This is represented by Cosmos' EVMOS and Celestia, which integrates Cosmos into the ETH expansion circle.

For example, they created a Rollup chain called Celestiums. The DA of this chain is in Celestia and the settlement is in ETH.

Of course, the more common combination in Cosmos’ own ecosystem should be DA in Celestia and settlement in EVMOS. In short, with the combination of Celestia and EVMOS, Rollup expansion has more hybrid options.

07
Sidechains backed by Rollup

This is what I mentioned earlier, the Anytrust chain that Arbitrum just released, which is also a very interesting idea.

The performance and cost are basically comparable to ordinary side chains. What are the characteristics? - As long as two out of 20 nodes are honest, we can run!

How is it done? Normally, as long as 19 nodes sign together, a block is produced, which has basically nothing to do with ETH L1 (only one root hash is uploaded to ETH L1, which is extremely simple). If something goes wrong and 19 signatures cannot be gathered, it will return to the Rollup mode, use the last block signed by 19 people as the check-point, and start the Rollup.

The advantages of doing this are, of course, greatly improved performance and significantly reduced costs. It is basically no different from a side chain. Moreover, compared to the BFT side chain that requires 2/3 honest nodes, AnyTrust only needs two honest nodes out of 20.

The disadvantage is that if 19 nodes collude, you will be in trouble and your funds can be stolen. As mentioned above, even if the nodes collude, Validium or Zk-Porter cannot steal your funds. At most, they will be temporarily frozen. Therefore, it is an option that does not require high security but has high performance requirements.

08
summary

The above solutions have different considerations in terms of security, TPS, and cost.

Without considering the multi-chain recursive solution of L3 (infinite TPS, infinitely low fees), from a single chain perspective, my personal feeling is as follows:

The safest one should be the traditional Zk-rollup;

The lowest fees should be Polygon and AnyTrust;

The highest TPS should be Validium and Zk-porter.

At that time, for developers, which chain to deploy on will depend more on whether they need security, performance, or cost more.

For our users, we will face even more terrifying liquidity fragmentation problems and too many projects to keep up with. Imagine that every Alt L1 and every L2 will give you several Dex, several loans, several stablecoins, derivatives and machine gun pools. It’s a headache just thinking about it.

Coupled with various Alt L1s, the Warring States Period of blockchain has finally arrived!