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Which projects are worthy of attention on the Layer 2 track of Ethereum?



With the recent high transfer fees of Ethereum, Layer 1 of Ethereum is obviously not enough. At present, people's eyes are focused on DeFi, and people may not have noticed that with the increase of Ethereum fees, the daily activities of dApps in other areas of Ethereum are declining, especially in the field of games.

Ethereum urgently needs to scale, which has been an old problem since 2017. However, after more than 3 years of hard work, there are more and more layer 2 solutions, which is dazzling. It is becoming more and more critical to figure out the nature of the project on this track.

Here also leads to a digression, where are the opportunities for other public chains at this time?

Gaming dApps have a large number of small payments, and the high Ethereum fees make it impossible for these users to continue playing. The value of each payment may be a few dollars or more than a dozen dollars, but the cost of a transfer is often a few dollars, which is too much for ordinary users, which directly leads to a decline in the daily activities of users of Ethereum-based game dApps. If you are a user of the Ethereum dApp game Sorare (Blue Fox Notes: Sorare is a football simulation game based on Ethereum, users can trade player cards), it is hard to imagine a user buying a piece worth less than 10 Euro cards while willing to pay up to $5 more.

Hedge fund Arca analyst: Ethereum is "very possible" to overtake Bitcoin: Golden Finance reported that according to crypto hedge fund Arca analyst Bodhi Pinkner, Ethereum is "very possible" (very possible) to overtake Bitcoin. Bodhi Pinkner predicts deflation for the second-largest cryptocurrency following a merger event expected to take place in September. Lucas Outumuro, an analyst at cryptocurrency research firm IntoTheBlock, previously estimated that in a deflationary scenario, ethereum issuance would be between -0.5% and -4.5%, meaning that ethereum would become increasingly scarce and the circulating supply The impact of the continued decline will be reflected in cryptocurrency prices. As of this writing, Ethereum has a market capitalization of approximately $201.5 billion and Bitcoin is approximately $445.9 billion. (Bloomberg) [2022/8/1 2:50:40]

The single-day transaction volume of NFT on OpenSea Ethereum once again exceeded $100 million: On November 14, according to Dune Analytics data, the transaction volume of NFT on OpenSea Ethereum exceeded $100 million on November 13, a record high on October 15. All-time high. [2021/11/15 21:51:14]

(As the gas fee of Ethereum rises, the daily activities of Top5 Ethereum games decrease, Source: DappRadar)

V God: At present, there are more than 800 ETHs away from the deflation of Ethereum: news on September 5, for the first deflation day of ETH on September 3, the amount of destruction is 352 ETH more than the block reward, V God (Vitalik Buterin) That said, technically, not quite. If you consider the daily PoS reward of 1200 ETH, there is currently more than 800 ETH away from deflation. [2021/9/5 23:01:12]

(Comparison of daily activities of non-Ethereum-based games and Ethereum games, Source: DappRadar)

From the above data, it can be seen that Ethereum-based game dApps have a very obvious correlation with changes in their fees, while other non-Ethereum-based games have a slight increase in DAU during the same period, which further proves the impact of fees on user behavior.

And this kind of situation, with the continuous development of DeFi, with the additional issuance and circulation of USDT on Ethereum, this situation of high gas fees may exist for a long time, before Layer 2 and PoS are not mature (Blue Fox Note: press The current development progress of Ethereum, sharding is estimated to be at least 2 years), this may be the best breakthrough opportunity for other public chains. For example, for EOS, if it can seize this rare opportunity, it may be able to differentiate itself from Ethereum. EOS should not only pay attention to Voice, but perhaps should pay more attention to breakthroughs in game dApps.

The trading volume and open interest of Deribit Ethereum options reached new highs: According to skew data, the 24-hour peak trading volume of Deribit Ethereum options reached 49 million US dollars, and the open interest of Ethereum options reached 241 million US dollars, both hitting new highs. It is reported that Deribit Ethereum options currently account for 93% of the market share. [2020/7/24]

In addition to EOS, other public chains should seize the opportunity, first strategically abandon DeFi, gather in game dApps or other breakthrough fields, and then enter DeFi in turn. Perhaps this is a better strategy than following Behind the leader Ethereum, the probability of such a chance of winning is relatively small.

The Layer 2 project is a scalability solution created to alleviate the plight of Layer 1. However, not all Layer 2 solutions have the same solution path. There are various trade-offs between different Layer 2 schemes. They differ in various aspects such as security, performance, usability, etc. These differences are enough to have a profound impact on their future. For investors, these differences are also an important basis for selecting projects.

ETH 1.x researchers are promoting the implementation of "Stateless Ethereum": Jinse Finance reported that ETH 1.x researcher Alexey Akhunov is promoting the implementation of "Stateless Ethereum". Maintain the resilience of the ETH 1.0 network as the chain continues to grow. People can choose to download parts of the state to run nodes on less expensive hardware without giving up full control over their data. Vitalik Buterin stated that statelessness is a prerequisite for block verification in ETH 2.0. According to Akhunov, the implementation phase of the project will start at the end of 2020. The goal of the project is to address the growing data burden of the blockchain. [2020/4/25]

Furthermore, these differences also lead to their possible applicability to different use cases and scenarios in the future. The current Layer 2 mainly includes the following categories: Plasma, Sidechain, State Channels, Opitmistic rollups, ZkRollup, Vadium. So many technical paths are dazzling, making it difficult for investors and developers to understand at once.

Alexa Gluchowski integrated all levels and simplified the main Layer 2 solutions into a table, basically expressing the trade-offs and pros and cons of these Layer 2 different technical paths:

(Comprehensive comparison of the six major layer2 technologies, Source:Alex Gluchowski)

It can be seen from here that zkRollup is the best in terms of security, followed by Optimistic rollups, but they also make the biggest trade-off in terms of performance, with the lowest performance in all layer 2 (in the case of ETH1.0); In terms of performance, State channels and Validum are the highest, but security is also sacrificed; in terms of availability, State channels perform best. It can be seen from the above that, with the same dilemma as Layer 1, Layer 2 also has trade-offs in terms of security, performance, and technology implementation costs. It is impossible to want everything.

So, when we see Layer 2, they may be completely different Layer 2, and their nature is not the same. In other words, the same Layer 2, their future prospects are not the same. So, what Layer2 projects are worth paying attention to?

If security, especially trustless and decentralization, is the top priority, then zkRollup and Optimistic rollups deserve the most attention. Representative cases in this regard include ZkSync, Loopring, Fuel, etc., which are more suitable for DEX and payment scenarios. Blue Fox Notes also mentioned before that Synthetix used the Optimistic rollups scheme to build its exchange; Loopring launched zkRollup-based exchanges and payments; Fuel Labs launched Reddit Cash based on the Optimistic rollups scheme, etc.

If scalability rather than security is the top priority, you can pay attention to StarkEx, OMG, Matic, Skale, etc., such as Tether integrating the OMG network, the virtual world Decentraland and Matic reaching cooperation, etc.

In the long run, higher security is more sustainable, and the Rollup series is the direction of development. In addition, they also have the opportunity to enhance their throughput on ETH2.0, which is a relatively optimistic technical direction for Blue Fox Notes. However, even so, in scenarios where security requirements are not so high, the demand for state channels, side chains, Plasma, and Validum still exists. Overall, the projects on the Layer 2 track urgently need to expand their application scenarios to prove their value as soon as possible. The Layer 2 track has the opportunity to produce large-scale projects, which may be second only to the public chain level projects. Who do you think has the best chance?


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