Blockchains like Ethereum have been the most sought-after since their debut in the crypto sector. With the vast amount of projects and individuals on the network, it is expected to be now congested. This is why carrying out transactions takes a long time, and traders pay more fees to finalize their transactions on time. In a bid to battle out these defects and create a serenade environment for traders and projects, developers came up with the idea of Layer 2 scaling solutions. In this article, we will be doing a detailed look into what Layer 2 entails while stretching our scope to cover the top 5 Layer 2 solutions in 2022.
What Are Layer 2 Solutions?
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Layer 2 solutions are secondary networks housed on a protocol to solve issues of the primary network. These issues border around scaling transactions and reducing the fees that come with congestion on a network. For example, Bitcoin and Ethereum are two of the biggest digital assets across the crypto market. With their networks being constantly congested, higher throughput is always needed. This is where Layer 2 scaling solutions come in. In simpler terms, Layer two solutions are blockchains where transactions are carried out away from the main blockchain. This way, layer 2 solutions eliminate the main chain’s fundamental issues.
How Does Layer 2 Solutions Work?
Layer 2 solutions carry the weight off the main chain by processing data that will cause it to experience issues. A typical example is carrying out transactions away from the main chain. Doing this paves the way for the main blockchain to be able to carry out a massive number of transactions. Asides from that, the security of the solutions is always optimum in the sense that the same security covers it as the main chain. This is mainly because the solution is always built on top of the main blockchain. They are also regarded as off-chains.
What Are The difference between L1 and L2 Solutions
Layer 1 and Layer 2 solutions have mostly everything in common. However, there are some slight differences between both of them. Below are the differences between the Layer 1 and Layer 2 scaling solutions;
One of the reasons Layer 2 scaling solutions were developed was due to the slow speed experienced by Layer 1. Although not all layer 1 blockchains are slow, popular blockchains like Ethereum and Bitcoin have experienced congestion. This is due to the number of people trying to process transactions simultaneously. While Layer 1 suffers from congestion, Layer 2 helps it free up this space by carrying out a massive amount of transactions in seconds.
Paying for blockchains transactions depends on how fast a trader wants his transactions validated and the tokens sent. In Layer 1, traders usually pay more to get their tokens across the line. This is due to the massive amount of transactions always pending. With this, miners take care of transactions with higher fees. Layer 2, on the other hand, provides traders with the cheapest fees when carrying out transactions. This is because of the less congestion and ease of carrying out transactions across the platforms.
Layer 1 blockchain is the base blockchain on which every activity related to the network is carried out. It is the underlying network with its mining consensus. Layer 2, on the other hand, is the secondary blockchain that is developed on the base blockchain. It helps to achieve higher scalability and boost the efficiency of the Layer 1.
Top 5 Layer 2 Solutions in 2022
As mentioned above, Layer 2 solutions have been doing the biggest jobs in terms of helping networks scale transactions. While most layer 2 are fighting for the top spot, some provide better services than others. Below is our Top 5 Layer 2 list for 2022 according to their market cap;
#1 Polygon ($10,010,288,900)
Formerly known as Matic Network, Polygon is a layer 2 scaling solution for Ethereum that allows developers to build dApps. It was launched in 2017 on the Ethereum blockchain before finally moving to its blockchain in 2019. The platform houses an SDK that developers use to create their applications. Using Polygon automatically transforms Ethereum into a multi-chain system. Like the other multi chains, Polygon adopts the security and ecosystem of Ethereum. Presently, Polygon can carry out more than 65,000 transactions every second. The block confirmation time of the network is also estimated to be less than two seconds. Integrating with the Plasma network gives PolygonPolygon the ability to house a massive amount of dApps. Its native token, MATIC, sells for $1.27 with a market cap of $10,010,288,900.
#2 Fantom ($2,531,880,695)
The Fantom platform is a smart contract platform that carries out its operations using a directed acrylic graph (DAG). It was created in 2019 after forming the foundation that oversees its services in 2018. Fantom uses its consensus while providing decentralized services using its consensus. Using its native token, the platform solves issues on smart contracts platforms like Ethereum. In terms of speed issues, Fantom has been able to reduce its transactions to under two seconds. The network made its debut as a close substitute for Ethereum while boosting scalability, security, and decentralization. Its core strength is processing thousands of transactions in about two seconds. Presently, its native asset FTM is trading at $0.99 with a market cap of $2,531,880,695.
#3 Harmony ($1,218,900,731)
The Harmony blockchain allows developers to leverage its tools to create and use decentralized applications. The network improves the work of the applications through its random state sharding. This allows the network to develop blocks in seconds. The blockchain-based focuses on the speed of processing and verifying transactions. The sharding enables the nodes to validate transactions less than other blockchains. The network employs the Verifiable Random Function to ensure that the nodes are safe and secure. This ensures that the nodes and validators on the network are random in selection. The native token of the blockchain, ONE, is trading at $0.102, with its market cap pegged at $1,218,900,731.
#4 Loopring ($1,118,575,830)
The Loopring protocol is a layer 2 platform that is available on Ethereum. The protocol enables a faster transaction completion rate by settling thousands in seconds. It also ensures that the fees charged for transactions are at the lowest minimum. The platform also allows developers to build their applications while still maintaining the security of Ethereum. The platform uses ZK rollups, scalable technology for layer 2. Loopring also doubles as a decentralized exchange that allows traders to carry out transactions without the need for fees. LRC, the native token of the chain, is currently trading at $0.842, with its market cap around $1,118,575,830.
#5 Oasis Network ($798,293,011)
The Oasis network is a privacy-focused scalable blockchain that promises high throughput and charges low fees for gas. Armed with a secure architecture, it provides a basis for developers to create decentralized apps among other products in the chain. The developers wanted the network to scale Web3 products and propel them for future use during its creation. It separates transactions into the consensus and ParaTime layer to enable faster scaling. The separation of both chains allows the network to work effectively by pushing transactions into the consensus. The ParaTime layer is decentralized and allows developers to develop a suitable ParaTime for their needs. It uses Rollups for consensus. Its native token, ROSE, is currently trading at $0.228 with a market cap of $798,293,011.
Layer 2 scaling solutions are among the best innovations that have entered the market recently. This is because they combine with layer 1 to work for the good of traders. With the scaling solutions, traders will not need to encounter congestion on the primary blockchain and would pay a reduced fee for transactions. However, you should note that you need intensive research to know the kind of layer 2 scaling solution you want to leverage. This is because the market is ever-changing, and there might be a new update that will push another scaling network to the front pick. Finally, it is advisable that when making trades, you should look critically into the token of your choice. It would help if you also traded with your spare cash.