Ethereum Layer 2s – CryptosRus

On Mar 25, 2023

Ethereum Layer 2s

Ethereum has grown to be a massive powerhouse of economic growth with over a million transactions moving over $2B dollars every day! This mega monetary machine has got its limitations, primarily cost per transaction, that have lead to the growth of layer 2 Ethereum scaling solutions.

Layer 2s are chains that settle on Ethereum in batches. They settle millions of transactions themselves yet require the Ethereum mainnet to bring them to finality. These L2s do this in different ways, but all are using the Ethereum Virtual Machine and settle on layer 1. I’m not going to get into the subtle differences of how each settle uniquely, as this would take a lot of technical speak. In stead, I would like to mention the 3 major L2s that you should know and why you might want to use them instead of the Ethereum mainnet.

Polygon:

The polygon network was the first layer 2 to settle on Ethereum. It currently offers thew quickest and cheapest transaction of the 3 networks I’ll mention. Being the first to market typically has its advantages which for Polygon have been many. Polygon has received the most institutional investment so far and has made many corporate partnerships, especially in the NFT space. One of the major differences with Polygon is that its gas token isn’t Ethereum. When transacting on Polygon you need to use its native token Matic to pay for transactions. This slight difference, in my opinion, has made it slightly less user friendly. The growth on Polygon has been impressive, and with easy on-ramps from that of Coinbase that gives you a way to transfer assets directly off of Coinbase to the Polygon network, has led to an impressive total value locked of $1.6B and 24h volume of $192M yesterday.

Optimism:

Optimism was the second L2 to market and though it uses ETH as its gas token, it was the first to airdrop its governance token, OP. Optimism has become known in the defi space as the “incentive” chain as OP tokens have generally been used to incentivize defi applications. Though optimism has kept up with Polygon in terms of TVL, $1.28B as of this writing, its 24h volume was half of that of Polygon today. Optimism’s primary use case has been decentralized finance and I believe it will continue to be one of the best chains for this. A seeming lack of NFTs and gaming have lead to less adoption from my perspective and this is why I think it hasn’t grown as fast as the last chain on this list.

Arbitrum:

Launch shortly after Optimism, has quickly become the largest of the 3 in TVL and volume. It currently holds $3.4B and 24h volume is currently at $1.86B. Daily transactions have even rivaled the Ethereum chain in the last week and just a couple days ago, March 23rd, their governance token $ARB was airdropped! Arbitrum, like Optimism is well known for its defi applications, primarily GMX which is a perpetuals exchange similar to the defunct FTX. However, unlike Optimism, it is growing a healthy NFT community (shout out to PufDao) and has its own side chain, Optimism Nova, that is solely focused on gaming.

With an upgrade coming to Polygon in just a couple of days that will make it even cheaper and faster to use as well as new layers 2 coming online, like Zkzync that just went live with their mainnet yesterday, there will be plenty of competing chains to choose from. My advice is try try as many as you can and see what you like. Perhaps you’ll get an airdrop like mine from Arbitrum that was worth over $1,000.

As usual, thanks to George and the team at Cryptos R Us for the oportunity to share about all things Ethereum. You can follow me on my YouTube channel or on twitter @ALLTHINGSETH.

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