Fragmentation in DeFi's Layer 2
While the Ethereum protocol’s revolutionary smart contract functionality is what makes DeFi possible, the ETH transaction speed for DApps is notoriously slow, and it stands in the way of further DeFi development and mass adoption. Just as a point of reference, Ethereum’s transaction throughput is about 1,500 times slower than that of Visa and about 250,000 times slower than Alipay’s transaction throughput.
Several blockchain scaling solutions have been proposed to solve this scalability problem, including State Channels, Sharding, Plasma, OVM, and ZKRollups. These scaling solutions can be categorized as Layer 2 scaling solutions.
Layer 2 solutions sit on top of Layer 1 (the Ethereum mainnet in this case). Layer 2 solutions offer enhanced performance and scalability. As the blockchain ecosystem continues to evolve, Layer 1 (mainnet) will ultimately become the ‘trust layer’, while layer 2 begins to function as the ‘transaction layer’.
This will decrease the required computing power for transactions, as most transactions will be offloaded and processed outside the mainnet Layer 1 chain, eliminating much of Ethereum’s scalability issues.
Ethereum's Layer 2 scaling protocols such as Rollups, State Channels, Plasma, and Validium improve the Ethereum network and solve the scalability issues by increasing transaction speed (faster finality) and transaction throughput without sacrificing decentralization or security.
Although the Ethereum Layer 2 solutions like Polygon, Arbitrum, and zkSync are gaining traction, none of them dominates the market, which creates more fragmentation in the L2 space. If a user wants to move between two distinct L2 solutions, there is no direct way, requiring a movement back to L1, which can take up to a week due to long lock-up periods.
Composable seeks to act as an optimal solution to enable cross-layer interoperability among the Ethereum Layer 2 Networks, allowing them to communicate with each other and perform near-instantaneous asset swaps. Composable is building a variety of different components to facilitate an Ethereum multi-layer ecosystem.
Last modified 2mo ago
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