Second-layer scaling solutions are designed to help Ethereum users deal with network congestion, and they’re becoming increasingly popular.
According to layer two ecosystem tracker L2Beat, second-layer scaling solutions designed to combat network congestion on Ethereum are flourishing, with over $1 billion locked up in scaling protocols.
Crypto exchange dYdX is at the top of the list, with $285.6 million in the bank.
Using a number of technologies, scaling solutions enable decentralized programs (dapps) to avoid network congestion. Layer two rollups, a form of scaling solution that sits atop the Ethereum blockchain, process a batch of transactions before submitting them to the main chain as a single transaction, are tracked by L2Beat.
Different variants of rollups, including as Optimistic, Plasma, Validium, and ZK-rollups, bundle and verify these series of transactions in different ways; over half of the top ten protocols by value locked are based on ZK-rollups, with a total value locked of $547.56 million.
The main distinction between different forms of rollups is whether they maintain data on-chain or off-chain, as well as whether they use Fraud Proofs (which present evidence that a block was inaccurate) or Validity Proofs (which present proof that a block was correct) (which present evidence that a block was correct).
Validium employs validity proofs with data that is stored off-chain, whereas ZK-rollups use validity proofs with data that is stored on-chain. Meanwhile, optimistic rollups employ fraud proofs with data stored on-chain, whereas Plasma and State Pools use fraud proofs with data stored off-chain.
Polygon, which the site’s founders define as a proof of stake sidechain, is one scaling solution that L2Beat does not track (essentially a clone of the Ethereum main chain, where assets can transactions are processed and moved, and can be called back to the main chain).
Layer two, according to L2Beat, is “a chain that derives its security entirely or partially from L1 Ethereum so that users do not have to rely on the integrity of L2 validators for the security of their funds.”
The Ethereum network is transitioning to Ethereum 2.0, which will introduce a new consensus method called proof of stake as well as a new scalability mechanism called sharding. Sharding is the process of dividing huge volumes of data into smaller chunks.
However, rollups as a scaling technique still have a place, with the Ethereum network potentially being able to reach 100,000 transactions per second by combining sharding, rollups, and other scaling solutions.