Ultimate L2 research
Let's find the next 100x gem
Introduction
Hi, dear member of the Racing Crypto Club 🤝
Today we will dive into the most promising L2 out there to find the next gem. Let’s get right into it 👇
Optimism
In October 2022, Optimism introduced the OP Stack, an open-source development stack that powers the OP Mainnet.
It introduced the idea of the Superchain, which refers to a group of L2 blockchains built on the OP Stack.
The Stack consists of various software components (i.e. libraries of code) that together form Optimism’s L2 rollup and can be used to create highly customizable L2 blockchains.
Essentially, it aims to simplify the creation of L2 blockchains.
The Bedrock upgrade, released June 6, 2023, was the first official release of the OP Stack and brought several key improvements.
• Lower fees
• Deposit times are down by 70%
• Improved proof modularity
• Improved node performance
The next step after the Bedrock upgrade is for Optimism to upgrade itself to the Superchain. Optimism’s L2 rollup chain is the first member of the Superchain. Coinbase’s upcoming Base L2 will be the second member, with a mainnet announcement expected this year.
Worldcoin has also committed to building on the OP Stack, after raising $240M. BNB Chain also announced the testnet for opBNB, their EVM-compatible L2 chain based on the OP Stack.
The end goal is a "Superchain" comprised of a network of rollups built using the OP Stack. This ecosystem of interoperable chains will share sequencing, proving, and bridging infrastructure, fostering seamless communication between networks.
Optimism is currently the third Layer 2 by TVL, but with the vision and the partners already building on the OP Stack, I’d not be surprised to see it become the leader in the next few years. Too many people are bullish on Arbitrum and sleeping on Optimism. Coinbase & Binance bringing their user bases are huge, and I believe it's only the beginning.
Arbitrum
Arbitrum, an optimistic rollup, is currently the largest and most dominant L2 network in Total Value Locked (TVL) and has been live since August 2021.
The Arbitrum ecosystem comprises:
• Arbitrum One: A core rollup of the ecosystem.
• Arbitrum Nova: Second rollup for projects with high transaction volume expectations.
• Arbitrum Nitro: Software stack powering the Arbitrum L2
Arbitrum Nova is a sidechain with up to 90% lower gas fees compared to Arbitrum One. Although it offers lower security, Arbitrum Nova is ideal for gaming, social, and other high-bandwidth applications. Opensea and TreasureDAO recently launched marketplaces on Nova.
What is the Arbitrum vision? Arbitrum, in March 2023, like Optimism, introduced an open-source framework available for everyone. It’s called “Arbitrum Orbit” and allows the creation and deployment of L3s without requiring permission or formal approvals.
The easiest way to understand L3s is to think of them as the rollup for an L2. Instead of settling on an L1, L3s settle on an L2. They offer vastly increased scalability, rendering them an ideal solution for high-throughput applications. The difference between the OP Stack and Arbitrum Orbit is that L3s will be built on top of Arbitrum One, while the OP chains (L2s) will be independent networks sharing security with each other.
Layer 3s could become a good narrative in the future. We have seen it with dYdX, the first protocol to build its app chain. However, I think the OP Stack has a bigger margin of growth as it targets a broader range of users through institutional entities.
Arbitrum vs Optimism
The main technical difference between the two chains is that Optimism uses single-round fraud proofs while Arbitrum uses multi-round fraud proofs.
In normal English, this means Optimism's method is faster but potentially more expensive due to higher gas fees because it's executed on the L1. Arbitrum's way takes more time but is more cost-effective. Moreover, Optimism uses the Ethereum Virtual Machine (EVM), while Arbitrum has its own Arbitrum Virtual Machine (AVM).
That means Optimism's programming language is limited to Solidity. Arbitrum supports all EVM programming languages.
Polygon
Polygon is a platform dedicated to enhancing Ethereum’s scalability, a goal they accomplish by utilizing diverse solutions. Their flagship product is the Polygon PoS sidechain, which currently handles 2-3m transactions daily from 300-400k addresses.
Polygon has also ventured into the app-chain thesis, releasing its very own solution, Supernets, which empowers developers to establish customizable app chains.
Moreover, Polygon zkEVM, their EVM-equivalent ZK-rollup solution, had its mainnet debut in late March and has since garnered over 177k unique addresses and 20-50k transactions daily.
Polygon 2.0 is the latest addition to its suite of L2 products and seeks to unify these platforms to create a seamless user experience.
Conceptualized as a conglomerate of L2 chains powered by ZK technology, Polygon 2.0 utilizes a unique cross-chain coordination protocol for seamless interoperability among Polygon zkEVM, PoS, and Supernets.
Polygon 2.0 consists of four protocol layers, each enabling an important process within the network:
• Staking Layer
• Interop Layer
• Execution Layer
• Proving Layer
The Staking Layer is a PoS-based protocol that leverages Polygon’s native token to provide a restaking feature to users. The Interop Layer facilitates cross-chain messaging within the ecosystem, making the whole Polygon network feel like a single chain by enabling:
• Shared access to native Ethereum assets
• Seamless composability
The Execution Layer enables any Polygon chain to produce sequenced batches of transactions, aka blocks. The Proving Layer is a performant, flexible proving protocol. It proves all transactions for every Polygon chain.
I see Polygon as the main competitor of Optimism for mass adoption. They already closed many big partnerships with Web 2 companies, onboarding millions of users.
On the other hand, Optimism is onboarding Coinbase and other entities with a big network of institutions.
Base
“Base is a secure, low-cost, developer-friendly Ethereum L2 built to bring the next billion users to web3.” The chain is built on the OP Stack and incubated within Coinbase with plans to decentralize progressively in the years ahead.
The network will feature Coinbase integrations, easy fiat onramps, and access to 110m+ users and $80B+ assets in the Coinbase ecosystem. After releasing the testnet on February 23, the team expects the launch to occur this year after accomplishing the criteria listed below.
• Successful Regolith hard fork completed in testnet
• Successful infrastructure review with the OP Labs team
• Optimism’s Successful upgrade of Bedrock
• Successful internal and external audits with no critical severity issues
• Demonstrated testnet stability
In the depths of the bear market, Coinbase had 8.3M monthly transacting users (Dec' 22). On the other hand, $MATIC, $OP, and $ARB (As of July 7) report these numbers:
Average Fees: $3.04m
Average Revenue: $1.23m
Average Daily Active Users: 207.6k
Coinbase would have to convert 2.50% of its 8.3m bear market users to reach these competitors' average daily active users. This means there is a concrete chance that Base will become one of the main, if not the biggest, L2 in the DeFi space.
Mantle
The mantle is a novel L2 solution aiming to take Ethereum scalability to the next level while maintaining a high degree of decentralization and robust security. Unveiled in 2023, Mantle is a modular design network that separates the three key layers of a blockchain - consensus, execution, and data availability - to allow independent optimization.
Key Features:
• Consensus Layer: It works similarly to how Layer 1 (L1) chains work, focused primarily on sequencing transactions and blocks.
• Execution Layer: It is isolated from the other two layers and dedicated to executing transactions and smart contracts.
• Data Availability Layer: Based on innovative data availability sampling (DAS) technology, it ensures that data is readily available and not withheld, improving the security of the network.
Mantle’s modular design network could prove to be a game-changer in the L2 space. By allowing independent optimization of the three key layers, it could enable the network to be more flexible and improve scalability without compromising on security or decentralization.
Mantle has also garnered attention for its partnership with BitDAO, a new decentralized autonomous organization. This strategic partnership could potentially offer significant value to the Mantle network and strengthen its position within the blockchain ecosystem.
A unique aspect of Mantle is its focus on enhancing the user experience, particularly for the gaming and GameFi industry. With Mantle's increased scalability, lower transaction costs, and faster transaction speeds, it could potentially revolutionize the GameFi landscape and offer new possibilities.
Mantle, despite being a newcomer in the Layer 2 landscape, has shown significant promise. Its innovative technology, focus on user experience and commitment to decentralization make it a worthy contender in the growing L2 race.
In conclusion, the Layer 2 space is dynamic and rapidly evolving. Each of these solutions—Optimism, Arbitrum, Polygon, Base, and Mantle—brings unique strengths to the table and is working towards making Ethereum scalable. While competition is fierce, the end goal is shared: to enhance the blockchain ecosystem, encourage adoption, and pave the way for a decentralized future.
Binance
As of June 2023, Binance announced the testnet launch of opBNB. opBNB, powered by the OP Stack, has a strong focus on maintaining compatibility with Binance Smart Chain, which offers a significant advantage for BSC developers and users.
Similar to Base, opBNB is set to leverage Binance's massive user base, providing a seamless and cost-effective solution for the millions who already use Binance. This suggests a high potential for opBNB's quick adoption and growth in the DeFi ecosystem.
opBNB offers the advantages of OP Stack's features: scalable solutions, lower fees, and reduced deposit times, much like other L2 solutions using the OP Stack. Moreover, opBNB aims to provide a secure, flexible, and interoperable platform.
opBNB
It's important to note that opBNB's success is linked to BNB, Binance's native cryptocurrency. If opBNB gains traction, it could have a positive impact on BNB's value, creating a ripple effect on the entire Binance ecosystem.
The ability to switch Data Availability schemes based on security and performance needs is another standout feature of opBNB. It offers a level of adaptability that few Layer 2 solutions possess, promising a future-proof platform.
opBNB's roadmap includes launching the testnet and mainnet in 2023. The mainnet launch will be a significant milestone, showing how Binance's Layer 2 solution performs in real-world scenarios, opening up vast opportunities for high-frequency trading, games, and social networks.
The battle of L2s will be fascinating to watch. With tech giants like Coinbase and Binance entering the fray, the competition will intensify. However, the ultimate winners will be the users who will benefit from improved scalability, security, and lower transaction fees.
In conclusion, it's clear that each L2 solution brings unique offerings to the table. They all share a common goal: to make the blockchain ecosystem more efficient, secure, and accessible for everyone.
We look forward to seeing how these networks will grow, innovate, and impact the blockchain landscape. With such intense competition and rapid advancements in technology, the future of Web3 looks promising.
This is just the beginning. Let's keep our eyes open to see how these exciting developments unfold. Remember, no matter how complex the technology, the focus should always be on creating a better and more inclusive digital future for all.
ZkSync
zkSync is a layer 2 scaling solution developed by Matter Labs. It uses zkRollup technology, aiming to provide Ethereum-level security with the scalability of a centralized exchange. It's one of the key projects driving the #L2 revolution.
zkSync uses Zero-Knowledge Proofs to bundle multiple operations into a single proof. This increases scalability by moving most of the computational work off-chain while ensuring high-level security through Ethereum's mainnet.
One significant advantage of zkSync is that it allows users to pay transaction fees in the token being transferred, rather than requiring ETH for gas fees. This vastly improves the user experience and brings Ethereum closer to mainstream adoption.
ZkSync's smart contract capabilities are a critical feature of its platform. Using Zinc, a new zk-friendly programming language, developers can write and deploy smart contracts on zkSync, unlocking a new world of L2 dApps.
Matter Labs is also working to make zkSync upgradeable without the need for hard forks. This modular design ensures it can incorporate future Ethereum improvements and scale with the growing Ethereum ecosystem.
By using a Proof-of-Stake consensus mechanism for block validation, zkSync upholds decentralization, aligning with Ethereum's core values. zkSync plans to move to Ethereum's validation once sharding is implemented in Ethereum 2.0.
Another major goal of zkSync is to become fully permissionless, allowing any project to build and deploy smart contracts on their L2. This will further contribute to Ethereum's scalability and support for diverse dApps.
ZkSync's vision extends beyond just being a scaling solution; it's a stepping stone towards a more scalable, secure, and user-friendly Ethereum network. With Layer 2 solutions like zkSync, the possibilities for Ethereum to revolutionize various industries are boundless.
Keeping an eye on projects like zkSync is crucial for understanding the future of Ethereum and DeFi. As Ethereum continues to evolve, Layer 2 solutions like zkSync will undoubtedly play a vital role in its growth and adoption.
ZkSync isn't just a competitor in the L2 space; it's setting standards for what Layer 2 should look like secure, scalable, and efficient. It's a project that's worth watching as the Ethereum ecosystem continues to evolve.
The rise of Layer 2 solutions like zkSync signals a new era for Ethereum and blockchain technology at large. It's not just about scaling, but also about creating a more accessible, user-friendly blockchain ecosystem.
I hope you've found this deep dive into all L2 insightful and engaging. Let's continue to explore and learn together in this ever-evolving DeFi landscape. If you like the content you can always support me 👇
Be sure to follow MooMs as he has done a big part of the research 🤝
Until next time, dear member of the Racing Crypto Club!