Layer 2: Scaling Solutions for Ethereum

What?

• Ethereum scaling solutions
• Separate blockchain
  • Extends Ethereum
  • Inherits the security guarantees of Ethereum
• All user transactions on the Layer 2 can ultimately settle back to Layer 1
• Ethereum also functions as a data availability layer for Layer 2s
  • Layer 2 will post their transactions data onto Ethereum
  • Rely on Ethereum for data availability
    • Used to get the state of Layer 2
    • Dispute transaction of Layer 2

Why?

Blockchain has 3 desirable properties

• Decentralized
• Secure
• Scalable

“can only achieve 2 out of 3” - Blockchain trilemma

High demand -> Need to scale without sacrificing decentralization and security => Need Layer 2 to scale Blockchain that takes advantage of robust decentralized security of Layer 1

How?

• Communicate with Layer 1 by submitting bundles of transactions
• Layer 1 handles security, data availability, and decentralization
• Layer 2 handles scaling by computing and sending finalized proofs to Layer 1 -> Remove transaction loading.

Rollup

• Preferred layer 2 scaling solution in Ethereum
• Reduce gas fees by up to 100x compared to Layer 1
• Rollup bundle (“roll up”) hundreds of transactions into a Layer 1 transaction => Fee will be dived/distributed to all users (owners of these hundreds of transactions) -> Cheaper
  • For example:
    • 1 Layer 1 transaction is paid for 1eth as fees
    • 100 Layer 2 transactions rolled up in 1 Layer 1 transaction are also paid for 1eth. So 1 Layer 2 transaction is just only needed 0.01 eth to execute.
• Rollup is executed outside Layer 1 (in Layer 2), but finalized result (proof) is submitted to Layer 1 => and can be secured by Layer 1 security mechanisms.
• Have 2 approaches (different on posting transaction data to L1):
  • Optimistic
  • ZK Rollups aka Zero-knowledge Rollups

Example

• Arbitrum One
• Optimism
• Boba Network

References

• https://ethereum.org/en/layer-2