Without waiting for Ethereum 2.0, DeFi protocols are migrating to Layer 2 to solve the problem of high transaction fees

As Ethereum gas fees soar and the network struggles to keep up with demand, numerous decentralized finance (DeFi) protocols are racing to implement layer 2 scaling solutions.

Popular DeFi platforms including Uniswap, Aave, and Synthetix are getting closer to launching their own scaling solutions.

Synthetix, an on-chain synthetic asset protocol that tracks the value of real-world assets, will upgrade to a native version implementing L2 scaling on September 24.

According to a blog post by Synthetix founder Kain Warwick, the “Fomalhaut” upgrade is the first phase of the L2 migration to Optimistic Ethereum, an incentivized test network designed to ease gas costs for small SNX stakers who currently pay hundreds of dollars in fees to collect their weekly rewards.

On September 29, Synthetix will undergo a second upgrade, called “Deneb,” which will also include measures to reduce gas fees. Warwick added:

“Both of these upgrade releases are in direct response to Ethereum network congestion causing gas costs to rise. Some of these changes are coming as we transition to Optimistic Ethereum, and the changes included in these two releases are the first steps towards L2 Synthetix.

He concluded that the hybrid approach of L2 will likely carry Synthetix through to the end of the year. Optimistic rollups are L2 solutions that scale Ethereum smart contracts and dApps to 2,000 transactions per second.

As the world's leading DeFi DEX, Uniswap is also developing Uniswap V3, looking forward to a major upgrade. When asked about V3 earlier this year, Uniswap founder Hayden Adams said V3 will "solve all problems," meaning L2 may be an important part of its upgrade.

There is already a basic demonstration of the L2 version of the token exchange protocol on unipig.exchange. Unipig, which uses the Optimistic rollups solution, was launched in October 2019.

London-based lending protocol Aave, the second most popular DeFi protocol in terms of total value locked, is preparing to launch a second version of the platform that will streamline operations to reduce transaction fees.

Aave said in a blog post last month that its “aTokens” — used to represent crypto collateral assets on the platform — will integrate Ethereum Improvement Proposal (EIP) 2612 for zero-gas transaction approval. This EIP enables transactions involving ERC-20 operations to be paid for using the tokens themselves instead of gas-accumulated ETH.

“The short-term goal is to drive adoption of aTokens, which Aave is actively researching to bring to L2.”

The post did not provide further details on which L2 solution will be adopted, nor did it provide a timeline for the launch of Aave v2.