Second-level Solutions – the future of the Ethereum Blockchain

We have already talked more than once about “Layer-2” solutions of the second level. They help Ethereum scale by speeding up transactions and making them less expensive. More important is the question of how can you benefit from these breakthroughs in second-level scaling?

For this article on Coinmarketrate.com we have chosen four promising second-level solutions: Arbitrum, Optimism, StarkNet and zkSync. We’ll talk about them. In addition, we will consider their level-2 tokens. 2021 has become fundamental for layer-2, and 2022 may be the year of their takeoff. When that happens, these four projects are likely to play a key role.

 ZK-Rollups and Optimistic Rollups

There are two types of rollups that occupy the space of second-level solutions: zk-rollups and optimistic rollups. Although both of them serve to scale Ethereum, they do it in different ways. However, although both solutions are breakthrough, none other than Vitalik Buterin, co-founder of Ethereum, believes that zk-rollups are a more promising solution in the long run.

Two teams that have made incredible progress in the field of zk-rollups are StarkWare and Matter Labs, which we will discuss in more detail later. Moreover, Ethereum is a first-level blockchain that is served by second-level solutions.

• StarkWare

StarkWare is pushing the boundaries of scalability with two second-level solutions that show great promise: StarkEx and StarkNet. StarkEx is a scaling solution that StarkWare released in 2020. In addition to the zk-rollup mode, StarkEx has another mode of operation called “validium”.

Validium is developed to order for specific dApps that will use them. However, in the future, StarkEx will offer a third option so that users can decide on the spot which they prefer – zk-rollup or validium.

Among the projects already using StarkEx are dYdX, DeversiFi and Immutable X.

• StarkNet

StarkWare is also developing StarkNet, another layer-2. StarkNet is a decentralized zk router compatible with Ethereum Virtual Machine (EVM). Compatibility is achieved due to the compiler to the Cairo programming language.

The team developed StarkNet for general purpose computing. Therefore, developers can create dApps on Cairo or migrate Ethereum code using the Solidity-to-Cairo compiler.

StarkNet Alpha was launched on the main Ethereum network in November 2021, so it is still quite new. However, since StarkWare puts a lot of effort into developing StarkNet, it looks like one of the promising solutions for scaling in the future.

In general, the second-level solutions from StarkWare are powerful technologies that are still in the early stages of their development. But by familiarizing yourself with these second-level solutions now, you can better prepare for the future.

• zkSync

Another second-level solution that brings faster and cheaper transactions to the Ethereum blockchain is zkSync. This project promises more good news for Ethereum users who crave lower fees. In addition, zkSync manages to transfer most of the activity from the first level, while inheriting its security advantages.

zkSync was developed by Matter Labs. Like StarkWare, zkSync belongs to the zk-rollups class. Since zkSync uses a similar technology, it also knows how to withstand congestion and becomes less expensive as more people join the network.

Those who use Ethereum can tell you that tier one platforms become more expensive when the network is overloaded. Thus, zkSync provides a much needed service.

At the time of writing, it is in ninth place among second-tier solutions with a total cost of blocking (TVL) of more than $70 million, according to L2BEAT. This number is likely to grow as zkSync features evolve, attracting more and more users seeking lower transaction fees.

• Arbitrum

Offchain Labs has created an Arbitrum. This is an “Optimistic Rollups” compatible with EVM. This makes it easier to transfer the code of the NFT and DeFi protocols to it.

This compatibility helps explain why Arbitrum is the most famous second-tier solution with TVL, at just over $3 billion. Moreover, the long waiting time for withdrawals is one of the problems. Therefore, bridges such as the Hop protocol, Synapse and xPollinate can be used for faster deposit and withdrawal of funds.

• Optimism

As you might have guessed, Optimism is also optimistic rollups. It currently ranks fourth in TVL, and offers full compatibility with the Ethereum Virtual Machine (EVM). This means that DeFi and NFT developers can move their dApps to level-2 with one click.

There are liquidity bridges to reduce the seven-day waiting period for funds to be withdrawn from optimistic rollups. For example, you can replenish Optimism using Argent, Hop protocol and Celer Network.

Studying second-level tokens

Surprisingly, all the well-known second-level solutions discussed in this article (Arbitrum, Optimism, StarkWare and zkSync) remain “without tokens”. On the other hand, perhaps this is not surprising, given the technological feats associated with the creation of such cryptographic complexity.

Some analysts predict that by 2023, two or more second-tier tokens will enter the top ten cryptocurrencies by market capitalization after launch. To do this, they will have to compete with alternative solutions of the first level. New second-tier tokens, combined with incentives such as airdrops, can contribute to the development of this technology.

This means that the probability of launching tokens from at least one of these four companies is high. This is good news for early adopters who can potentially receive second-level tokens during airdrops.

Unfortunately, Tier 2 solutions still have to overcome technical hurdles before tokens are issued. The space needs better bridges between level 1 and level 2. That’s why these projects are likely to postpone the launch of tokens until that time.

But when they do, the issue of tokens should begin in late 2022-2023. Whenever that happens, zkSync will probably lead the way. It is the main contender for the launch of tokens, as he has already confirmed his commitment to the principles of community ownership.

At the opposite end of the spectrum is Optimism. His team publicly denies that it will launch a token. StarkNet, on the other hand, chooses the middle path. The project does not confirm or deny the release of the token in the future. Arbitrum also states that it has no plans to issue a second-level token.

Level-2 Decision Optimism

However, public statements in one direction or another are not as important as the need for the platform to stimulate liquidity. Incentives will appear. The only question is which ones.

The probability of the appearance of second-level tokens opens the door to new questions, such as: how will second-level tokenomics work? What kinds of incentives will they offer? How will they distribute their tokens? More importantly, if the incentives take the form of airdrops, how much will the community and loyal users get?

At the moment, no one has any answers, but zkSync has already announced that it will distribute 67% of its tokens to the community. If this is the case, then the zkSync token can set the standard for competition.

So, what does this mean for those who want to get ahead of the launch of zkSync tokens? To get into the number of participants in any issue, you will have to use the appropriate protocols in one form or another. For example, you can make transactions in second-level dApps, use a bridge, or create new dApps.

If you are not a developer, then focusing on the first two options – transactions and the use of bridges, will be a more accessible approach.

Level 2 solutions – TVL. Source: DeFi Pulse

The Ethereum economy is moving towards zk-rollups. Although zkSync is still at its very early stage, it is already demonstrating what zk rollups are capable of. Some dApps, such as zkNFT and ZigZag, are also very new and are at an experimental stage. Also, ZigZag still hasn’t been audited, so proceed with caution.

Conclusion

Have you ever regretted not being an early adopter of some of the most successful protocols and platforms in existence today? However, to become an early follower in the present, it is necessary to foresee the future and take risks.

These include financial risks, but they can be reduced by limiting trading amounts. However, there is another risk – temporary. Using dApps that you are not interested in to earn potential second-level tokens in airdrop may turn out to be a waste of time. And what if the airdrop never takes place? Spending months on such a solution, which will not bring tokens, can end up being a huge waste of time.

Therefore, the task is to choose the winning horse. The zkSync token seems like a profitable business, but other promising projects will also launch their own tokens.

After all, if you want to earn second-tier tokens, you’ll have to do your due diligence to predict which ones will offer giveaways to your loyal users. It’s not an easy task, but doing something worthwhile is never easy.