Layers 2 Rise After Ethereum’s ATH Throws Gas Charges On Moon
According to the L2Beat tracking service, Ethereum Layer 2 solutions are facing strong overall growth once again. Once Ethereum fees have reached new heights and the network becomes impractical for using decentralized applications and solutions, Layer 2 networks are useful in reducing transaction costs and speed.
In the last seven days, the total value locked in the Layer 2 Ethereum solution has increased by 20% and reached $4.39 billion. Projects like Arbitrum, Loopring and Optimism have shown growth of 20%, 84% and 98% respectively. Arbitrum and Optimism both use optimistic stacking technology.
Optimistic rollups
This type of Layer 2 solution allows for the utilization of smart contracts that run on top of the main Ethereum layer. Although smart contracts run above the main layer, they are still secured by the main network.
If the user is willing to use a Layer 2 solution, his or her funds are being stored in the smart contract on Ethereum. Users send an off-chain deployment transaction to an aggregator which then creates the new smart contract, then calculates a new state root and finally creates an Ethereum transaction.
Other solutions like Loopring utilize different technology called ZK Rollups, which functions differently and is being marketed as a more sophisticated technology than Optimism. It uses complex mathematics and calculations to enable transactions with zero-knowledge proofs.
Growth of the technology
The main reason for the rapid growth and development of the Layer 2 solution is the increasing fees on the Ethereum network. Previously, U.Today had reported that Ethereum’s mainnet fees had consistently stayed above 100 Gwei for an entire week, resulting in a transaction costing around $ 15.
With decentralized applications sometimes making thousands of TPS, gas fees can become a serious issue for users. This is why Layer 2 solutions are receiving more attention from investors who are unwilling to spend hundreds of dollars on transaction fees.
