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Top 10 Layer 2 Protocols You Need to Know
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The blockchain industry has seen its functionality and scalability expanded thanks to the integration of layer 2 solutions. These unique networks are designed to help alleviate congestion and improve functionality. Today, there are many second-layer protocols in operation.
Top Layer 2 Protocols
These unique networks have helped some of the market's most popular projects remain relevant. Here are the top 10 layer 2 protocols you need to know.
Lightning Network
When it comes to second-layer protocols, the Lightning Network is perhaps the best known. The Lightning Network was created to help blockchains, Bitcoin in particular, scale. The network leverages private payment channels which users pre-fund to reduce costs. This structure enables unlimited transactions within the payment channels at a fraction of the cost of traditional transactions.
When the channel closes, the transactions are posted to the mainnet. This approach improves speed, reduces congestion on the mainnet, and enables micropayments. Micropayments were not possible for Bitcoiners for years due to the price of transaction fees being more than these small transactions. The Lightning Network changed everything with its added flexibility.
The Lightning Network has also added capabilities to the Bitcoin network via the integration of smart contract programmability and token standards. For example, the BRC-20 tokens standard leverages the extra room created by the Segwit upgrade to create NFTs (non-fungible tokens) on the mainnet. All of these capabilities and more are possible thanks to the ingenuity of the developers pushing the Lightning Network.
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Polygon
Polygon is one of the most popular layer 2 solutions in the market currently. The project entered service with a focus on helping to alleviate Ethereum scalability concerns. To accomplish the task, the network introduces an EVM-compatible virtual machine and custom cryptocurrency.
Source -Polygon Homepage – Layer 2 Scaling Solutions
Polygon improved Ethereum's performance and helped the network to expand its DeFi community. Notably, the network was the first to offer a layer 2 PoS option with success in the ecosystem. These factors and its stability helped Polygon become a popular option for ERC-20 developers.
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Arbitrum
Arbitrum is another option that started with the goal of helping Ethereum's struggling community. The network entered service as one of the few options that leveraged optimistic roll-up technology to help reduce congestion. This approach provided better performance and lower costs.
Today, Arbitrum serves multiple networks and is currently powered by Nitro. This proprietary full-stack enables developers to leverage the roll-up architecture easier. Arbitrum is a major player in the layer 2 industry with +5B in total value locked and +9.4M active users.
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Loopring
Loopring is a layer 2 solution with an added focus on DEXs. The developers wanted to introduce an open-source layer 2 option that included everything developers needed to create more user-focused platforms. The platform includes modules that make it easy to create non-custodial, high transaction, ERC-20 DEXs.
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Boba Network
Boba boosts some impressive stats with reports showing Ethereum users saved 25% when they used the network versus the main net for transactions. This hybrid network leverages optimistic roll-ups to provide lower fees and more capabilities. This approach separates computations and validation which streamlines the processes. Notably, Boba was created by the Enya team, who are also one of the main contributors to the OMG Foundation.
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Starkware
Starkware is a privacy-focused layer 2 solution which has seen more users turn to it for scalability and added security. Starkware leverages ZK-Rollups to keep your identity private. This style of network allows wallets to conduct transactions without trading actual addresses. Zero Knowledge networks add another layer of difficulty to those who want to track your crypto transactions. Starkware applications have completed +$900B in transactions and are currently a popular option for NFT traders and Dapp developers.
ZKSync
ZKSync is a layer 2 solution that leverages ZK-rollup technology to keep your identity private. The network integrates a stark-based protocol that makes it possible to reduce hardware requirements for network nodes. The results are a more open and capable network that requires less hardware to process common crypto actions such as transactions and minting NFTs.
Optimism
Optimism is another major contender in the layer 2 race that has managed to cement itself as a viable option. The network uses optimistic roll-up technology to reduce congestion and provide better performance. Currently, Optimism is one of the largest scaling solutions in the Ethereum ecosystem with +$500M in TVL and more than 90 dapps operating.
Optimism is home to some of Ethereum's biggest players including Uniswap, the first and largest DEX in the Ethereum market. It's also home to Synthetix and several other popular trading options. One of the main reasons the network has seen so much success is its easy onboarding. Developers don't have to learn any new code to migrate their platforms over to the network.
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Fuel
Fuel is a new type of layer 2 option. The system uses a modular blockchain structure which enables it to accomplish unique tasks such as executing transactions in parallel. This feature improves transaction times and makes the network better suited for Dapp and smart contract usage.
Interestingly, Fuel was the first layer 2 solution to use optimistic roll-ups to reduce congestion. It's also the first modular execution layer-based option. These factors make it highly competitive. Additionally, its pioneering strategy and timing continue to help FUEL gain new users.
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Aztec
Aztec is one of the most advanced privacy-focused layer 2 options available today. The network has a selection of unique features including encrypted wallet balances and other features designed to improve privacy. Like other competitors, ZK-rollup tech is integrated into the network.
The system shields transactions from prying eyes even during withdrawal. The platform's unique private withdrawal feature is a big plus that has Ethereum users celebrating. The system also introduces a variety of ways to recover lost coins which makes it a bit more user-friendly than some other options.
Layer 2 for the Win
Layer 2 scaling solutions are a great way to improve performance on the blockchain. For the earliest blockchains, these systems are a crucial part of their strategy to remain relevant and useful. In the future, more blockchains will rely on second-layer protocols to retain their position as market leaders. As such, these networks are worth watching moving forward.
