As Bitcoin surged in popularity with more transactions, the network congestion issue reached unprecedented levels. Ethereum was created to address this issue, but its limited transaction throughput of a few hundred TPS still falls short of large-scale use. This has resulted in frequent overcrowding and fees for even basic smart contract activities reaching a few dollars.
Layer 2 Scalability Solutions
Layer 2 protocols aim to improve Ethereum’s throughput and reduce user fees without altering the underlying consensus algorithm or other fundamentals.
Layer 2 scalability solutions do not modify Ethereum’s core consensus algorithm, instead relying on the protocol as a decentralized security layer. This makes it possible to raise the maximum throughput of Ethereum and reduce user fees paid for transactions.
The technology uses zero knowledge cryptography to maintain transaction security and permit off-chain calculations.
Zero-knowledge cryptography (ZK) is a cryptographic proof method used to verify knowledge without revealing additional information. The verifier can validate that the prover possesses the knowledge, but no other details are revealed.
Zero Knowledge and ETC
A ZK-rollup chain is a protocol based on Ethereum smart contracts that processes transactions off-chain and periodically reports them to an on-chain rollup contract. With on-chain data available, users can show proof of ownership and withdraw assets without interacting with the system. Off-chain storage increases scalability while reducing security assurances.
Also, another system concept is proposed, which is a hybrid system that allows for dynamic user decisions of on- or off-chain data storage. This is known as volition.
Other solutions include a sidechain — an independent blockchain connected to Ethereum via two-way bridges, running its own consensus rules and block parameters, and a Plasma chain — a separate blockchain tethered to ETC that utilizes fraud proofs to arbitrate disputes.
There is also a Validium chain. Validium chain uses zero-knowledge rollups to process data off the main L1 Ethereum chain, allowing up to 10k transactions per second per Validium chain. Multiple chains can be run in parallel.
Why Having Many Scaling Solutions is Important
The Ethereum vision can be fully realized if various scaling solutions are used together, helping to reduce congestion and increase transaction speed. A single solution is not enough — the whole is greater than the sum of its parts, with alternatives offering distinct benefits that can make a big difference.
