Research on Layer2 and Optimistic Public Chains

Introduction

In the previous article, we briefly introduced the development history of Ethereum and the basic information about the Ethereum 2.0 upgrade, extending to the two main sub-tracks of Layer 2: Optimistic Rollup and ZK Rollup. If we compare Ethereum to a company, we can understand the Ethereum 2.0 upgrade as a restructuring of the internal management structure, transforming from the original chain structure to a beacon chain-sharding hierarchical structure, while Layer 2 further outsources tasks on this basis, reducing the company's burden, improving efficiency, and enhancing overall task processing capability.

This article will further explore Layer 2 solutions and conduct an in-depth analysis of the Optimistic Rollup track.

Overview of Layer2 Solutions

Layer 2 refers to off-chain networks, systems, or technologies built on top of the underlying blockchain (, specifically Layer 1), used to scale the underlying blockchain network. Currently, there are two classification methods for Layer 2:

• Narrow Layer 2: must inherit the security of the Ethereum chain and bundle transactions on Layer 2 Ethereum, with Layer 2 only responsible for computation, such as ZK and Optimistic rollup.
• Broadly defined Layer 2: includes all Ethereum scaling solutions, mainly 5 types:

1. Sidechain: An independent blockchain that operates in parallel with Ethereum. It locks the assets of the main chain to mint the same amount of assets on the sidechain, achieving "atomic swaps." It has weaker security but good independence and flexibility, such as Polygon.

2. State Channels: Establish dedicated payment channels and multi-signature addresses between traders to complete off-chain transactions, recording the results on-chain only at settlement. Fast speed, low fees, such as Lightning Network and Raiden Network.

3. Rollups: Delegate data execution work to Layer 2 and batch submit to the main chain. There are two types: Optimistic Rollup and ZK Rollup.

4. Validium: Uses zero-knowledge proofs, only uploads the state root and proof to the mainnet, while transaction data is stored on Layer 2. High throughput but sacrifices some security, similar to ImmutableX.

5. Plasma: By locking main chain assets, transactions are transferred to the child chain, which periodically submits state updates to the main chain. Settlement is fast, significantly reducing transaction fees.

This article will focus on the sidechain solutions Polygon PoS, the Optimistic Rollup projects Arbitrum and Optimism, as well as the BNB ecosystem projects opBNB and COMBO, analyzing their technical principles, ecosystem, and gaming support.

Polygon PoS Analysis

Introduction to Polygon

Polygon, originally known as Matic, was initially a blockchain scalability platform referred to as "the blockchain internet of Ethereum." With the development of its ecosystem, it has expanded from a single Layer 2 solution to a "network of networks," aimed at addressing the transaction speed and scalability issues of the Ethereum mainnet, primarily focusing on areas such as blockchain gaming and NFTs.

Polygon PoS is the foundational layer of Polygon, while the ZK Rollup matrix consisting of Polygon zkEVM, Polygon Miden, Polygon Zero, and Polygon Nightfall represents potential growth points. The Polygon 2.0 upgrade plan aims to upgrade Polygon PoS entirely to zkEVM Validium. This article primarily analyzes Polygon PoS, with the ZK section to be detailed in the next article.

technology

Polygon PoS is based on Ethereum, but it has faster transaction speeds, higher scalability, and a trading volume that remains stable at more than twice that of the Ethereum mainnet (, with about 2 million daily transactions ), and gas fees are only 0.1% of Ethereum.

Polygon PoS is an EVM-compatible sidechain that went live on June 1, 2020, and is currently the most mature Ethereum sidechain solution. The architecture is divided into three layers:

1. Ethereum Layer: Composed of Ethereum smart contracts, responsible for processing flows, utilizing Ethereum's security, with Matic tokens staked on this layer.

2. The Checkpoint Node Layer of PoS: Core layer, produces and verifies Matic sidechain blocks, listens to Ethereum chain events and passes them to the Matic sidechain, periodically publishes blocks to the Ethereum chain, achieving information synchronization.

3. Matic Sidechain Layer: Responsible for transactions, shuffling, and block formation, regularly publishing checkpoints to the node layer.

Polygon's hybrid structure supports the Plasma framework, inheriting Ethereum's security; the PoS Bridge further ensures chain security through validators and staking MATIC.

Ecology

Polygon launched in 2020 and entered its explosive period in Q2 2021, becoming the third complete ecological public chain after Ethereum and BNB. In Q1 2023, the number of projects exceeded 53,000.

In terms of DeFi, the platform's early development coincided with the booming phase of DeFi, with rapid project expansion. Projects like Uniswap, Aave, and Curve preferred Polygon for multi-chain deployment. In April 2021, a $150 million DeFi development fund was launched, offering Matic rewards. However, the innovation of DeFi projects within the Polygon ecosystem is insufficient, with an overall on-chain TVL ranking fifth, having been surpassed by Arbitrum.

In terms of NFTs, Opensea was the first to support the Polygon chain in June 2021, capturing the low-end NFT market. Several international big brands launched NFTs on Polygon, such as Starbucks, Mastercard, Adidas, etc., attracting more brands to join. Popular projects include Lama Kings, Doodle Changs, y00ts, Bungo Beanz, and Super Pengs.

In terms of games and the metaverse, there are 468 active game projects on the Polygon chain, second only to BNB and Ethereum. The leading metaverse projects Decentraland and The Sandbox were deployed on Polygon in April and June 2021, respectively. Other popular games include Pixels, Arc8, Benji Bananas, Sunflower Land, and Skyweaver.

Polygon Studios was established in July 2021, focusing on investments in the NFT, Gaming, and Metaverse sectors. In terms of offline promotion, due to its low-cost and fast transaction experience, Polygon has become one of the best choices for Web2 and traditional companies to venture into blockchain or web3.

Summary of Advantages and Disadvantages

Advantages:

• Speed: Efficient bridging, deposits, and withdrawals, with a trading speed of 7000 tps far exceeding Ethereum's pre-upgrade 15 tps.
• Security: Relying on Ethereum and sharing its security
• Compatibility: Fully EVM compatible, can directly deploy Ethereum dApps
• Low cost: about 0.1% of Ethereum

Low transaction fees and considerable speed make Polygon the best choice for high-frequency trading projects within the Ethereum ecosystem such as DeFi and GameFi. Although the rise of Layer2 projects like Arbitrum, Optimism, and zkSync may impact the market landscape, Polygon is also continuously evolving, fully embracing the ZK track and launching a series of products based on ZK technology.

The timing for Polygon PoS to enter the market is just right. In 2020, the Ethereum network was facing significant congestion and scalability issues, creating a pressing need for phenomenal products in the Ethereum ecosystem to enhance performance. Meanwhile, the Rollup track and Ethereum 2.0 upgrade were still under development, and the main competitors in the Layer 2 market had not yet posed a threat. Coupled with effective marketing strategies, Polygon leveraged the early growth of DeFi, adopting a subsidy strategy for leading projects like Aave, Curve, Uniswap, and Quickswap; in the gaming and metaverse sectors, it implemented investment and incubation strategies for extensive deployment; and it engaged in deep cooperation with public blockchain platforms like ImmutableX to share traffic dividends. As the Polygon ecosystem matures and the ZK ecosystem develops, Polygon is expected to usher in a new wave of growth, solidifying its position in the top tier of public chains.

Arbitrum Project Analysis

( Introduction to Arbitrum

Arbitrum, as a leading Layer 2 project, has always attracted significant attention. During the token issuance period in the first half of 2023, it became a hot topic in the blockchain community, and its ecosystem was highly sought after. According to Defillama data, Arbitrum's total locked value has surpassed several public chains, ranking fourth, surpassing the well-established Layer 2 sidechain Polygon, showcasing its dominant position as the leader in Layer 2.

The Development History of Arbitrum:

• May 2021: Arbitrum One officially launched on the Ethereum mainnet
• October 2021: Arbitrum Nova public testnet launched
• 2022: The Arbitrum Orbit plan is progressing steadily, a Layer 2 solution specifically for NFT and VR applications.

Current data:

• TVL: 5.93 billion USD
• Circulating Market Cap: $1.45 billion
• FDV: 11.3 billion USD, no new unlocking in the next 6 months
• Daily active addresses: about 150,000
• Daily transaction volume: approximately 620,000, second only to Polygon

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) technology

Arbitrum is a layer 2 scaling solution that uses the Optimistic Rollup technology. It assumes that all transaction validators are honest, but sets a challenge period to allow for challenges to be raised. The system introduces two roles: validators and aggregators.

• Validator: processes transactions and earns rewards
• Aggregator: Monitors whether validators are executing transactions correctly

There is a 7-day challenge period before the transaction returns to the Ethereum mainnet, during which aggregators can raise challenges. If it is confirmed that there is a problem with the transaction, the malicious actor will lose their staked tokens. As long as there is at least one honest aggregator during the challenge period, the security of Arbitrum can be assured.

Main product line:

1. Arbitrum One: Based on Optimistic Rollup, it verifies transactions on the Ethereum chain, achieving high-performance and low-cost smart contract execution. Most DeFi and NFT applications are deployed here.

2. Arbitrum Nova: Uses zk-Rollup technology to verify transactions through zero-knowledge proofs, enhancing security and efficiency. Mainly used for high-throughput applications such as gaming and social networking.

3. Arbitrum Orbit: Ecosystem Development Plan, providing tools, libraries, and support to facilitate developers in building Arbitrum applications.

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) ecology

The Arbitrum ecosystem has reached 600 projects, featuring many high-quality projects such as GMX, Radiant, TreasureDAO, Camelot, etc., providing a large number of use cases. Among them, game projects like Treasure DAO and Pirate Nation have seen explosive growth in data, bringing significant activity to Arbitrum.

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) Summary of Advantages and Disadvantages

Advantages:

• High performance: Optimizes smart contract execution, increases transaction throughput, reduces costs, alleviates Ethereum network congestion.
• Low cost: Layer 2 execution significantly reduces Gas fees
• Compatibility: Compatible with Ethereum smart contracts, supporting the migration of existing dApps and smart contracts.
• Security: Adopts Layer 2 scaling security measures such as Rollup technology
• Ecological support: Attract well-known projects from the Ethereum ecosystem to provide users with more choices.

Disadvantages:

• Centralization: Layer 2 solutions are often more centralized than the main chain, which may raise security and trust issues.
• New learning curve: New users need to learn new workflows and usage methods, such as transferring assets through bridging, etc.
• Low network effects: It takes time to establish sufficient network effects to attract more users and developers.

Overall, Arbitrum has significant advantages in high performance, low cost, and compatibility, but it still needs to address challenges related to centralization and network effects. With the development and adoption of Layer 2 technology, Arbitrum is expected to enhance the scalability and user experience of the Ethereum ecosystem.

Optimism Project Analysis

Introduction to Optimism

Optimism is an Ethereum Layer 2 solution that moves transfers, smart contracts, and more to the Optimism chain for processing, only recording the final results on Ethereum, significantly reducing transaction fees.

Development History:

• Early 2020: Initiated and released the white paper
• End of 2020: Launched a testnet to verify the feasibility and security of the technology.
• 2021: Actively collaborated with the Ethereum community to promote Layer 2 development
• End of 2021: The mainnet officially launched, marking the release of Ethereum's first legitimate Layer 2 scaling solution.
• Subsequently: widely adopted, attracting numerous projects to deploy applications, including DeFi, NFT markets, etc.

Optimism plays an important role in addressing the congestion and high transaction fees of the Ethereum network, representing a significant advancement in Layer 2 scaling technology.

( technology

OP Stack is the core technology of Optimism, which can be understood as a set of open-source software components that allow anyone to build L2 blockchains on Ethereum using Optimistic Rollup. OP Stack consists of four main components: