Ethereum’s scalability hardships are well-documented and often discussed. In the time it’s taken the grandfather of all smart contract platforms to start upgrading its creaking infrastructure, many rivals have emerged. However, apart from a few notable exceptions, many of them have failed to prove a real threat to Ethereum’s dominance.
Nevertheless, Ethereum’s problems persist. This is where second-layer solutions come in. Second layers, or layer 2 platforms, provide a workaround that allows developers access to the flourishing Ethereum ecosystem, but in a way that’s faster, cheaper, and more scalable. Even Vitalik Buterin himself has issued calls for “power users” to switch to layer 2 solutions rather than run their apps on the congested Ethereum network.
So which are the major contenders in the layer 2 race? Here are four of the biggest players.
The network formerly known as Matic, Polygon is one of the leading players in the layer 2 race. It was conceived with the idea of using Plasma technology to scale Ethereum. Plasma is a side chain solution that allows processing to take place off the main Ethereum chain with dedicated proof-of-stake nodes validating transactions. Transactions are periodically updated to the Ethereum blockchain, ensuring full interoperability. As a scalability solution, Polygon can handle far higher throughput than Ethereum at a lower cost.
Polygon has seen considerable success, particularly over recent months as DeFi has become more popular and transaction fees have soared as a result. It’s now home to decentralized prediction market Polymarket, DeFi-cum-NFT crossover Aavegotchi, and Decentralized Games, the casino of the Decentraland metaverse.
Thanks to an all-Indian founding team, the project has become the flagship blockchain initiative to emerge from the subcontinent. It also has an advisory team that includes Hudson Jameson of the Ethereum Foundation and Ryan Sean Adams of the Bankless podcast.
Whereas most layer 2 projects simply aim to offer developers a scalability solution for Ethereum, Metis DAO goes a step further. It’s a second layer that offers any company, project, or developer an intuitive platform on which they can create a decentralized autonomous organization of their own. It offers low gas fees, high throughput, rich features, and an easy-to-use, code-free interface.
Metis DAO also introduces the concept of optimistic governance as an implementation of optimistic rollups. To put it in the most succinct way possible, rollups use actors called aggregators to accumulate transactions and public them into a smart contract on the main chain. Optimistic rollups assume a certain amount of honest acting, with a failsafe mechanism in place to prevent fraud. Therefore, optimistic governance assumes most collaborators want to operate for the good of the DAO but nevertheless operates a bond system to prevent malicious activity.
Metis DAO recently underwent a funding round in which it raised $4 million, including participation from Block Dream Fund, DFG, Master Ventures, and many more.
Like Polygon, OMG Network also uses a variation of the Plasma sidechain technology, known as More Viable Plasma, as a scaling solution for Ethereum. It bundles transactions into side chains as a way of achieving vastly higher throughput than the main chain can handle. OMG network targets use cases, including payments and settlements, rewards and loyalty points, and banking and finance.
OMG Network was among the first projects to target Ethereum scaling, conceived initially as OmiseGo in 2017. It was the first project to airdrop its tokens to Ethereum holders. Following an acquisition in 2020, OMG Network is now a subsidiary of a Hong Kong-based VC firm called Genesis Block Ventures. The project recently partnered with Enya, which is the largest global provider of secure multiparty computation, in a bid to bring privacy-preserving technologies to users of the OMG Network.
Loopring is a layer 2 for Ethereum that was developed with exchange shortcomings in mind. It aims to enable the creation of new types of digital asset exchanges, bypassing the high fees and slow transaction speeds suffered by DEXs such as Uniswap that operate on Ethereum.
Like Metis DAO, Loopring also uses a variation of roll-up technology, called zero-knowledge rollups or zk-rollups. Effectively, this method aggregates transactions together to be signed and committed to the Ethereum blockchain with just a header. Signatures are replaced by a zero-knowledge proof, which provides an assurance of veracity without Ethereum miners needing to see each transaction individually as they do with Ethereum transactions. Loopring claims that by using this technology, it can process at over 1,000 times the speed of Ethereum.
Loopring exchanges were recently incorporated into the OpenOcean exchange aggregator protocol, providing additional depth of liquidity and cross-platform trading capabilities.