The biggest problem of Ethereum is that it cannot be expanded. Many agreement companies are also actively responding to it. Many Layer 2 (layer 2) expansion plans have been launched on the market. Although there are so many proposals at the moment, because the project planning is too scattered, Ethereum users will lose many of the benefits that the Layer 2 solution will bring.
Ethereum’s expansion problem is no longer a secret. The current cost of trading on Uniswap may exceed $50, and it takes at least 15 minutes. For a blockchain that hopes to become a multi-billion settlement layer, the existing scale of Ethereum is not conducive to long-term development. If the scale problem is not resolved as soon as possible, users will continue to be lost. One of the most common solutions is the Layer 2 expansion platform, which allows users to quickly and cost-effectively conduct transactions on Ethereum in accordance with expectations and agreements.
There are three main Layer 2 solutions at the moment, and there are more to be developed. The Polygon solution has been launched for nearly a year. It uses Plasma (plasma) expansion technology and side chains for fast and low-cost transactions. Optimism and Arbitrum were released and put into use this summer. By using Rollups to achieve the same ideal trading environment as the Ethereum blockchain. Starkware, xDAI and OMGX have also made considerable contributions to these solutions.
On the surface, it seems that there are many Layer 2 expansion plans that are a good thing, because users can choose their favorite trading platform. But in fact, these expansion plans have loopholes, and may even damage the Ethereum ecosystem in the short term.
With the continuous construction of Layer 2 expansion, many popular dApps (decentralized applications) have been forced to stand on the sidelines and be the first to implement Layer 2. For example, Aave has signed a smart contract with Polygon on the blockchain, Uniswap and Maker DAO will use Optimism, and Sushiswap and Chianlink are collaborating in Arbitrum. Many small projects have also made choices, and these projects have also been divided into three programs: Polygon, Optimism, and Arbitrm. Among the three solutions, Optimism has a slight advantage in terms of quantity, but it is still not enough to support it to stand out among all the Layer 2 expansion solutions. Although a project may be built on multiple schemes, it still needs a Layer 2 scheme to be the helm at the beginning, and voting to join a new Layer 2 scheme takes several weeks to decide.
If an agreement like Uniswap implements all Layer 2 expansion plans together is an obvious solution, but this cannot solve all problems. If Uniswap adopts Optimism and Arbitrum at the same time, Uniswap’s liquidity will be divided by the two, which means that the user transactions of these two solutions will decline, and a good trading experience will be lost, and users’ assets may also be affected. price. For dApps like Aave, decentralized liquidity may cause borrowers and lenders to be unable to obtain the best interest rates, resulting in economic inefficiency, and there are even fewer reasons for people to move from traditional financial instruments to DeFi.
In addition, if users want to transfer funds from Aave’s Polygon to Uniswap’s Optimism, they have to deposit funds from the Ethereum mainnet to Polygon, then from Ploygon to the mainnet, and then from the mainnet to Optimism. on. This approach can easily cost $100, and it does not realize any of the benefits created by the Layer 2 solution.
The Ethereum community is like a community of tribal culture. Some users only use Optimism, and some users use Arbitrum or Polygon. Due to the high fees of the mainnet, the Ethereum community is forced to form this tribal community, where users can choose their favorite dApps solution. In the long run, Ethereum 2.0 needs to lower the high fees of the main network to solve the problem of user fragmentation, but it will not be possible within a year or so.
One solution is to communicate with each other between Layer 2 bridges, but it is still difficult to achieve without the cost support of the main network. The most likely scenario is that exchanges such as Coinbase and Binance will launch centralized services that allow users to transfer from one Layer 2 to another. Even this method cannot completely solve the above-mentioned problems. Some users who are unwilling or unable to create accounts that comply with KYC authentication (user real-name authentication) still cannot trade without high fees.
The ideal situation is that only one or two Layer 2 expansion plans are needed to dominate the expansion of Ethereum, and each plan must have its own eye-catching DeFi application that allows users to avoid the need to regularly transfer from one to the other. All this will depend on the power of the market and the decisions of the developers of Ethereum dApps.