Ethereum 2.0 Sets Sail: Layer 2 Growth Expected to Be Promising

Ethereum 2.0 Phase 0's Beacon Chain officially launched its genesis block at 8 PM on December 1st, marking a critical milestone for the Ethereum community. It signifies the official start of Ethereum 2.0, accelerating the overall transition of Ethereum to PoS, and furthering the vision of a multiple-fold expansion.

However, the expected multi-year rollout period of Ethereum 2.0, the repeatedly changed roadmap, and the controversial migration costs have meant that this "fundamental upgrade" still faces many challenges. At the same time, the Ethereum community has seen the emergence of various Layer 2 solutions such as Rollup, Plasma, and Validium, each with its own advantages in scalability, implementation period, and engineering difficulty.

In the short to medium term, Layer 2 appears to be more attractive to Ethereum and the cryptocurrency industry, and may even become a long-term solution for the future evolution of Ethereum. This article aims to explore the necessity and value of Layer 2 in the context of Ethereum 2.0, as well as analyze the advantages and disadvantages of Layer 2 solutions and the current state of the ecosystem.

Layer2 may become an "add-on" to Ethereum infrastructure

For a long time, Layer 2 has been regarded as a transitional solution for public chains to mature, serving as an "extension" when the main chain's performance is insufficient to support high-concurrency transaction processing. However, the Ethereum core development team recently confirmed that the priority of the Layer 2 solution Rollup should be higher than that of the originally planned sharding solution. Vitalik stated:

1. The importance of Phase 2 is not emphasized for now, Phase 1 is dedicated to achieving data sharding for rollup use.
2. The Beacon Chain will have execution capabilities. After the Eth1-Eth2 merger, Beacon Chain blocks will directly contain transactions.
3. After the implementation of Phase 0, the support for light clients, data sharding, and merging will proceed in parallel.

This reflects the awkward situation of the core concept of 2.0, "sharding." As a project that is expected to take at least 2-3 years to implement, sharding can bring a maximum of 64 times improvement in TPS for the Ethereum network. In contrast, the existing Layer 2 solution, Rollup, can achieve up to 100 times improvement. Comparing the two, the strategic value of Layer 2 is evident, which is also the core reason for the adjustment of Ethereum's roadmap.

In addition to technical indicators, the design philosophy between Layer 2 and Layer 1 is also a key consideration for the importance of Layer 2. Vitalik has pointed out that it is widely believed in the blockchain space that Layer 1 should remain simple while building more complex Layer 2 functionalities on top of it. This is because changes at the infrastructure level are difficult and can easily lead to systemic harm. Therefore, in the short term, Ethereum needs to develop Layer 1 and Layer 2 in parallel; in the long run, more attention should be paid to Layer 2.

Applying this concept to the relationship between ETH2.0 and Layer2, it can be inferred that Ethereum and Layer2 should maintain a long-term coexistence relationship rather than a short-term auxiliary one. Especially considering that many important applications have publicly supported Layer2 solutions, such as Uniswap and Synthetix supporting Optimistic Rollup, Tether supporting the Plasma-based OMG Network, and Curve supporting ZK Rollup. These applications are not only the flagship of the Ethereum ecosystem but also the infrastructure that will support higher-level and more complex gameplay in the future. Their attitude essentially determines the status of Layer2 within the Ethereum ecosystem.

Each Layer2 solution has its own merits, Rollup has the most potential.

Currently, there are six main solutions for Ethereum Layer 2: state channels, sidechains, Plasma, Validium, ZKRollup, and Optimistic Rollup. These solutions differ in terms of custody, computational storage locations, proof mechanisms, and more.

Different scaling solutions have their own advantages and disadvantages. For DApp projects based on Ethereum, it may be wise to choose a suitable Layer 2 solution based on demand, especially when the Layer 2 ecosystem is still uncertain. It is even possible to use multiple solutions at the same time based on different needs in the same scenario.

Currently, the Rollup series solutions, which are widely supported by large applications, have rapid development progress and ideal scalability, are most likely to stand out. Among them, Optimistic Rollup may gain more support, mainly thanks to the backing of DeFi giants. Synthetix has clearly adopted the Optimistic Rollup solution and is advancing integration work. Uniswap has also opened the Unipig DEX demo based on this solution for users to experience, and the oracle leader Chainlink is also expected to adopt Optimistic Rollup.

The healthy competition and potential widespread application of Layer2 solutions are commendable, but they also bring new challenges: the composability of DeFi may be significantly weakened. Taking Rollup as an example, the two solutions, ZK and Op, are currently unable to interoperate, which means that the already fragmented liquidity will be further divided. However, for DeFi as a whole, a higher level of integration should be an important goal of Layer2.

In summary, the evolution of Ethereum 2.0 is full of exploration and changes, and the Ethereum community is likely to continue adjusting the roadmap in subsequent meetings. However, it is certain that as the Ethereum ecosystem becomes increasingly large, the possibility of fundamental transformations is diminishing. In this context, Layer 2 will become a long-term partner and infrastructure for Ethereum.