Ethereum has been in the spotlight for cryptocurrencies for some time and for good reason. With the popularity of the second largest blockchain network, the urgency to improve performance and scalability also increases.. The Ethereum network has addressed some congestion issues, the most recent of which caused transaction fees to rise in June 2020.
Overloading the network even increased the maximum allowable gas per block in the Ethereum blockchain, which allowed more transactions to be processed, which also meant The size of blockchain continues to grow, another scalability problem that Ethereum 2.0 Sharding wants to solve.
As Cointelegraph has previously reported, Stablecoin Tether (USDT) is the largest gas consumer on the network. This trend can be achieved through the exchange between other blockchain and Ethereum networks such as the latest $ 300 million transfer from TRC-20 USDT to ERC-20 USDT. According to Tether, other popular DeFi apps are among the network’s largest gas consumers Some of the tokens of these applications significantly outperform Bitcoin in their price returns.
Ethereum 2.0 is coming, but not early enough
As the DeFi ecosystem continues to grow, the urgency of scaling solutions that can ensure the usability of the network continues to grow. Ethereum 2.0 is considered a long-term solution that can give the network stability, and the long-awaited update is planned for this summer.
Although the initial release of Ethereum 2.0 is a remarkable event, it won’t bring any immediate changes. The first iteration will serve as a test ground for what will eventually become the only Ethereum. This change is expected to take one to two years. Indeed, the creator of Ethereum, Vitalik Buterin recently admitted that the team underestimated the time it took to develop the sharding and proof-of-stake properties that characterize Ethereum 2.0.
Therefore, the need for an alternative scaling solution that can compete, coexist, or precede Ethereum 2.0 becomes apparent. So, What are some of these solutions and do they really work? While Some projects like plasma have been abandonedThere are other independent projects that can now help Ethereum, some of which are even based on the technology that has left the now defunct plasma, as Jon Jordan, communications director at DappRadar, told Cointelegraph:
“Problems like gas pricing can be solved without Eth 2.0. There are numerous published and available Layer 2 solutions – Matic, Skale Labs, OMG Network, etc. – that would solve these problems to some extent. And DAPP -Developers actively integrating these technologies or trying to build their own. “
Second layer networks: the basics
Second-layer solutions aim to provide all or most of the functionality and security of your underlying blockchain without, or more specifically, using it in any other way. This is useful in the short term as it reduces congestion on the Ethereum network and keeps the blockchain free of “unnecessary” transaction histories in the long run..
Layer 2 solutions are complex and difficult to develop because they form a fine line between security and comfort. Blockchain networks are secure because every transaction is recorded in a fixed ledger. However, these solutions avoid this limitation. While this may not seem intuitive, “maximum” security is not always required. For example, frequent transactions between trusted people can be done over a second level network and this is just the beginning.
The concept of second-tier networks is neither new nor unique to Ethereum. Bitcoin itself is no stranger to congestion and scalability issues. Although the recent “emergency” in 2018 was treated with SegWit, a hard turn that changed Bitcoin’s rules and fit more transactions into each block, second-tier solutions have worked for years and can be widely used. in the future.
RSK and the Lightning Network are examples of such solutions. Today, There are several independent projects that use this concept to provide an immediate solution to Ethereum’s scalability problems and a better ecosystem for the DeFi industry.
Matic Network is based on the Plasma project and offers an alternative proof-of-stake blockchain based on a customized version of the technology. It uses a decentralized network from Stakern, which Matic has set up as checkpoints between the two blockchains. This method enables a cheaper, faster and higher transaction volume per second (TPS) in the second network, which can then be processed in the Ethereum network.
Matic offers solutions for multiple players in decentralized applications, including payment networks, decentralized exchanges and even gaming DApps, who according to Jon from DappRadar urgently need alternative solutions:
“To some extent, it depends on what type of dapp you’re running. I don’t think the situation is particularly urgent for DeFi and DEX operators. They see their dapps get more value. But the game activity has since Decreased by about 90% in April, so it is an urgent need for this sector. “
Skale offers organizers a subscription service that avoids the traditional gas prices that apply to every transaction on Ethereum. In short, the Skale network is like an unlimited WiFi package that is useful for those who spend a lot of time online. Skale uses “Ethereum Compatible Elastic Side Chains” to provide this service.
The OMG network has been around for a long time and enables faster transmission of ETH and ERC-20 tokens using a system similar to the projects mentioned above. OMG focuses on business use and claims to be the “only Ethereum blockchain-enabled scaling solution” that offers business-to-business solutions for companies wishing to transact with the Ethereum blockchain.
Ethereum 2.0 – layer two
So there are several solutions that can help Ethereum solve your current problems Can they be used now? Sandeep Nailwal, COO of Matic Network, told Cointelegraph that Matic is currently the only viable option:
“A fully functional version of [Ethereum 2.0] It would be available for applications that will execute their smart contract transactions in at least 1.5 to 2 years, while scalability is required in Ethereum today. “
While these solutions may be the only chance of survival, the question of Ethereum 2.0 release is: Will these “solutions” be out of date? However, it is always possible that they can coexist or even compete with the official Ethereum scaling solution. Nailwal believes that “Layers 1 are settlement platforms that are not supposed to have “commercial activity”.“and adds:
“Eth2.0 does not offer the infinite scalability of Ethereum. The best scenario is 64 shardings with shardings that may be similar to the current Ethereum chain. Suppose a single chain improves PoS and has 50 TPS. Even then 64 shardings you can do 3,200 Offer TPS. When this supply of TPS arrives, Dapps will use the chain aspects even faster and demand will increase faster. We will be in the same situation again. “
These solutions are also not exclusive to Ethereum. Some of the Layer 2 solutions aim to provide their services in multiple blockchain networks in the future and even enable decentralized transfers between blockchains.
The future of Ethereum
As individuals and companies continue to invest and participate in the decentralized financial area, andThe Ethereum ecosystem faces a fundamental challenge in which it must scale or lose importance. Although second-tier solutions can be extremely useful, they are still useless without a solid foundation on which to base and where companies can provide their services.
However, the current problems facing Ethereum offer the possibility that these solutions are mature, as does testing Ethereum 2.0. As Jon Jordan said:
“Eth 2.0 will be a gradual process. Even if it is released, developers will be careful to use it as safely for the next 6 months. I think there is a great opportunity for other Layer 2 solutions to gain market share. “