Ethereum 2.0 Leads a New Era of Blockchain, Layer 2 Solutions Make a Strong Push

The Ethereum 2.0 Phase 0 Beacon Chain officially launched its genesis block on the evening of December 1, marking the official beginning of Ethereum 2.0's journey forward. For the Ethereum community, this is a critically important milestone, signifying a significant acceleration from PoW to PoS, bringing the vision of tens of times scalability closer to realization.

However, the expected multi-year implementation cycle of Ethereum 2.0, the repeatedly revised roadmap, and the controversial migration costs have left this "transformative" major upgrade facing numerous challenges. At the same time, the Ethereum community has already seen the emergence of various Layer 2 solutions represented by Rollup, Plasma, and Validium, each with its own advantages in terms of scalability, implementation cycle, and engineering difficulty.

In the short to medium term, Layer 2 seems to be a more attractive "mechanical skeleton" for Ethereum and the cryptocurrency industry, and it may even become a long-term solution in the future evolution of Ethereum. This article will clarify the necessity and value of Layer 2 in the context of Ethereum 2.0, and explore the advantages and disadvantages of Layer 2 solutions and the current state of the ecosystem.

Layer2 may become the "external facilities" of Ethereum infrastructure

For a long time, the community has generally viewed Layer2 as a transitional solution for public chains to mature. However, the core development team of Ethereum has recently confirmed that the priority of the Layer2 solution, Rollup, should be higher than the originally planned shard approach. The founder of Ethereum clearly stated:

1. No longer emphasizing the importance of Phase 2 for now, Phase 1 is dedicated to achieving data sharding for use in rollup.
2. The Beacon Chain will have execution capabilities, meaning that after the Eth1-Eth2 merger, Beacon Chain blocks will directly include transactions;
3. The three major tasks after the implementation of Phase 0: light client support, data sharding, and merging will be promoted in parallel, and any module that is ready will be launched.

This actually reflects the awkward position of the core story "sharding" in 2.0. As a project that is expected to take at least 2-3 years to materialize, sharding is currently anticipated to bring a maximum of 64 times improvement to the TPS of the Ethereum network. In contrast, the existing Layer2 star solution Rollup can provide up to 100 times improvement. Comparing the two, the strategic value of Layer2 is self-evident, which is also the core reason for the adjustment of Ethereum's roadmap.

The founder of Ethereum once pointed out that a common approach in the blockchain field is to keep Layer 1 as simple as possible and build more complex functionalities on top of it using Layer 2. This is because changes at the infrastructure level (Layer1) are difficult and can easily lead to systemic damage. Therefore, he believes that in the short term, Ethereum needs to develop Layer 1 and Layer 2 in parallel, while in the long term, it needs to focus more on Layer 2.

If this design philosophy is placed in the context of the relationship between ETH2.0 and Layer2, it may be inferred that Ethereum-Layer2 should maintain a long-term coexistence relationship rather than a short-term auxiliary one. Especially considering that many Layer2 solutions now have received significant public support from important applications, such as Uniswap and Synthetix supporting the Optimistic Rollup solution, Tether supporting the Plasma-based OMG Network, and Curve supporting the ZK Rollup, they are not only the flagship applications of the Ethereum ecosystem at present, but also the infrastructure that will support more advanced and complex gameplay in the future. Their attitudes actually influence the position of Layer2 within the Ethereum ecosystem.

The CEO of a certain network that focuses on on-demand customized Layer2 solutions has a vivid analogy for this issue: "The founder of Ethereum likens Ethereum to a Swiss Army knife he created for the blockchain industry. However, even though it is a powerful and versatile toolkit, it is absolutely not enough for a chef to only use a Swiss Army knife in the kitchen. This is not to say that the Swiss Army knife is not useful, but it is indeed insufficient."

Each Layer2 has its own advantages, and the Rollup solution is most likely to be widely adopted.

The most significant feature of Layer 2 is that it does not have tight coupling, meaning that the validity of the main chain ( in Ethereum 2.0's "beacon chain" ) is not inseparably linked to the validity of the subchain. In other words, subchain blocks that contain invalid main chain blocks and main chain blocks that include invalid subchain blocks are not synchronized by definition.

Currently, there are mainly 6 solutions for Ethereum Layer2, which are State Channels, Sidechains, Plasma, Validium, ZKRollup, and Optimistic Rollup. Different Layer2 solutions differ in aspects such as whether they are custodial, whether they compute on-chain, whether they store on-chain, and whether they use fraud proofs or zero-knowledge proofs.

From the characteristics of each solution, it can be seen that different scaling solutions have their own advantages and disadvantages. For DApp projects based on Ethereum, in the uncertain ecological landscape of Layer2, choosing a Layer2 solution based on demand may be the right choice, and it may even be possible to use multiple solutions simultaneously in the same scenario based on different needs.

For example, if a developer wants to create a social media DAPP, they need to choose a highly scalable Layer2 foundation. After purchasing the tokens of a certain Layer2 platform to build the service, they find that they also need to enhance privacy, so they need to find privacy-enhancing protocols such as Aztec and then purchase Aztec tokens to continue building, but it is limited to using Aztec. However, a demand-based Layer2 platform makes decision-making more flexible, allowing them to choose and add features such as scalability, composability, privacy, or smart contracts, without needing to repeatedly make different decisions or purchase tokens for different technical protocols.

According to the current discussions in the Ethereum community, the Rollup series solutions, which are widely supported by major companies (, have fast development progress and ideal scalability, are most likely to stand out first and receive widespread support. Notably, Optimistic Rollup is expected to gain more support, primarily due to the backing of DeFi giants. Synthetix has already confirmed that it will adopt the Optimistic Rollup solution and is advancing related integration work. The DeFi "big brother" Uniswap has also opened a DEx demo called Unipig based on this solution for user experience on its official website. Additionally, the leading oracle Chainlink is also expected to adopt Optimistic Rollup.

The healthy and orderly competitive state of Layer 2 solutions and their potential wide-ranging use cases are commendable, but this also brings forth a new major issue: the composability of DeFi will be significantly weakened. Taking the highly praised Rollup as an example, the two solutions, ZK and Op, currently cannot interoperate, which means that the already fragmented liquidity will be further exacerbated. However, for the overall DeFi landscape, Lego blocks are not only the foundation but also a higher-dimensional integration should be the inherent significance of Layer 2. Imagine if the stablecoin exchange advantages of Curve were connected with the comprehensive liquidity advantages of Uniswap, would the trading volume of DEx reach new heights?

In summary, the evolution of Ethereum 2.0 is undoubtedly a path filled with exploration and change. It is believed that the Ethereum community is still likely to continue adjusting the roadmap in future meetings. However, it can be confirmed that as the Ethereum ecosystem increasingly becomes a vast ecosystem, the possibility of fundamental transformations decreases. In this context, Layer 2 will be its long-term partner and infrastructure.

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