Why L2 Scaling Solutions Matter

DeFi, or decentralized finance, has been a hot topic in the crypto space in recent years. One of the main challenges in the DeFi space is the scalability of the Ethereum network, which is the backbone of many DeFi projects. This has led to the emergence of layer 2 solutions, which are essentially parallel networks built on top of the Ethereum blockchain. These projects aim to improve transaction speeds and lower costs, making DeFi more accessible to a wider range of users.

One of the most popular L2 chains is Polygon (MATIC). By market capitalization, it is the largest Layer 2 solution powering Ethereum scaling and infrastructure development. Polygon is well-tested and developed, and it is already in use by many projects like Sushiswap, Aavegotchi, Chain Games, Quickswap, etc. It has also recently become the only blockchain firm to be selected for Disney’s accelerator program and it has also become the home for many of the estranged NFT projects from the failed Terra LUNA blockchain ecosystem that had imploded back in May 2022.

Another popular L2 project is Loopring (LRC), which is a protocol that is used for building non-custodial, orderbook-based decentralized exchanges (DEXs) on Ethereum. Loopring processes and routes crypto trades in a decentralized manner by matching sellers and buyers at a specific price without ever requiring the possession of the buyers’ or the sellers’ funds.

Arbitrum is also one of the fastest-growing DeFi platforms in the market and is expected to even cross Polygon if this rate of progress continues. It is founded by former US White House Chief Technology Officer, Ed Felton.

Optimism (OP) is yet another effort at improving the speed of Ethereum transactions and cut costs by settling them on another parallel blockchain using data compression techniques. Immutable X is a blockchain platform that simplifies the creation of non-fungible token (NFT) projects for developers. XDAI CHAIN is live since late 2018 and uses a stablecoin called xDai as its native crypto to run the blockchain. According to the project themselves, transactions on the xDai chain are “very fast, very inexpensive, and require a single token (xDai).”

ZKSWAP (ZKS) is another unique layer 2 scaling solution built on top of Ethereum blockchain. This is an automated market maker (AMM) type decentralized exchange (DEX) powered by a zkRollup technology. Skale is another open-source, layer-2 scaling solution that tries to solve the scaling problem on Ethereum-compatible blockchains by creating elastic sidechains that can be used by decentralized applications (dApps) to run their transactions.

In conclusion, layer 2 solutions are an important step in the DeFi space, as they help to overcome the scalability challenges of the Ethereum network. These projects offer faster transaction speeds and lower costs, making DeFi more accessible to a wider range of users. Some of the most popular L2 projects include Polygon, Loopring, Arbitrum, Optimism, Immutable X, XDAI CHAIN, ZKSWAP, and Skale. Keep an eye out for these projects and see how they continue to evolve in the ever-changing DeFi landscape.

Polygon Labs Arbitrum, Inc.Immutable Softwares Optimism Foundation #Blockchain #Crypto