In crypto, innovation is a driving force for many of its changes and improvements. An issue in crypto that has seen a lot of time and energy devoted to addressing is that of scalability. Ethereum is one of the most popular and widely used cryptocurrencies, and it has encountered issues with scalability that many other cryptocurrencies have also encountered. Ethereum has developed an assortment of scaling solutions designed to help the currency scale and reduce associated issues such as slow processing time and increased costs. These are referred to as Layer 2 and offer many different tools and solutions to help improve Ethereum’s effectiveness. Here is an overview of Ethereum’s Layer 2 Ecosystem and the tools it offers to improve Ethereum.
Understanding Ethereum’s Layer 2 Ecosystem
1. Arbitrum
Arbitrum is an improvement to Ethereum’s smart contracts and dapps. It does this by making them faster, safer, and more scalable. While Ethereum’s existing smart contracts offer security and are effective, there are drawbacks. The existing smart contracts have high execution costs and are simply inefficient. These things have negatively impacted end users and Arbitrum exists to address this.
2. Optimism
Optimism is designed to improve the user experience on the Ethereum mainnet. It makes the entire user experience smoother and more efficient while bringing down costs. Optimism is considered a layer 2 chain because it sits atop the layer 1 Ethereum chain. When you make a crypto transaction on Optimism, the process is executed. However, the data record of the transaction itself is posted on layer 1 where validation is done. To simplify, the two layers work together to create a more user-friendly experience without losing the benefits of the existing Ethereum chain.
3. Polygon
When you want to explore DeFi options, Polygon helps improve the process. While Ethereum is in itself a widely used and effective crypto token, it does have a key issue that Polygon helps address. This issue is a common one in crypto and that is scalability. Polygon is a layer 2 layer that uses side chains to help scale Ethereum to make it more effective by providing more bandwidth for the execution of activities. Polygon is an execution layer that does the heavy lifting while the underlying Ethereum layer (layer 1) records information and consensus. These two layers working together make things less expensive and faster.
4. Coinbase Base
Developed by the crypto industry leader, Coinbase (alongside Optimism) Base is a layer 2 solution that helps Ethereum with scalability and speed issues in addition to offering effective security and keeping end users safe. An advantage of Base is that it allows access to other useful innovations from Coinbase, including its tools, products, and its user base. Base offers many improvements while still working alongside the existing Ethereum infrastructure.
Final Thoughts
As cryptocurrencies continue to expand, grow, and increase their user base, solutions will be needed to help the existing blockchains properly manage the transactions performed on them. Ethereum’s Layer 2 solutions are an example of the innovation and creativity that will be used to continue to improve these networks for the people who use them.