While questions about the network’s capacities revolve around rising transaction costs and accelerated activities in the area of decentralized financing (defi), the founder of Ethereum, Vitalik Buterin, believes that Layer 2 solutions can increase the network by the factor in just a few months 100 could scale to meet growing demand.
Sidechain bundling as a workaround for the current network congestion
Ethereum has surpassed many milestones in the past 12 months and thanks to its smart contract features it can be seen as the protocol responsible for popularizing the defi revolution. However, as the demand for the network service increased at the same time, this created new headaches for users as the rising gas costs made transactions significantly more expensive.
These developments coincided with the ongoing ETH2 rollout, which is effectively updating the original infrastructure to support better performance through improved scalability, higher efficiency and higher transaction throughput. However, recent activity has slowed network performance and sparked debate about the best methods to address these issues.
In a recent interview with Naval Ravikant on the Tim Ferriss Show, Vitalik Buterin, the 27-year-old co-founder of Ethereum, discussed how one response to this overload lies in second-tier scaling solutions that could be implemented in a few months. According to Buterin, rollups like ZKS could play a key role in reducing network costs and increasing performance.
Rollups complement plans for sharding as part of ETH2 upgrades
In contrast to a traditional Ethereum transaction, which would require the network to confirm the transaction, layer two rollups of a sidechain can effectively record and validate all transactions before they are combined into a single transaction. That single transaction then has to be approved by the main chain, in this case Ethereum.
In contrast to the existing confirmation times, rollups can provide instant confirmation and thus bypass the congestion that has plagued the Ethereum network for months. Buterin believes this Layer Two scaling solution can offer 100x scalability in months. When combined with layer-one scaling solutions such as sharding, which are also intended for the network, this number increases to 1000 times.
In addition, sidechains can handle the high transaction fees that have annoyed users and add affordability already being used by new Defi apps looking to expand their presence.
Transition of the decentralized exchanges to the second shift
Decentralized exchanges (Dex) and defi protocols like Uniswap were the unfortunate victims of the overloading of Ethereum due to their Layer 1 construction. To remedy this shortcoming, the ZK rollups from ZKSwap, an AMM Layer Two based token swap protocol (Automated Market Maker), developed a sidechain rollup to solve the problem.
This rollup can support Defi but without the high gas charges that Defi attendees have been following. Buterin believes this rollup could be the answer needed to achieve the 100x scalability he mentioned, and the solution has already produced demonstrable results.
ZKSwap is currently at the top among similar solutions, seeing a 24-hour trading volume of over $ 66,000,000, according to a March 10 tweet focused on the Layer Two Dex competition.
L2 DEX trading volume in the last 24 hours:
1 @ZKSwapOfficial $ 70,717,033 (7% $ ZKS)
2 @QuickswapDEX $ 32,014,977 (25% $ QUICK)
3 @loopringorg $ 8,447,643 (63% $ LRC)
4 @nashsocial $ 1,608,638
5 @deversifi $ 763,514
6 @Leverj_io $ 234,417
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– L2_Dex_Wars (@ L2Wars) March 10, 2021
The Total Value (TVL) in the DEX (decentralized exchange) numbers is currently over $ 813 million at the time of writing.
Do you think the Ethereum network will use the current bull run to boost X100 as Vitalik predicts? Let us know in the comments below.
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