Layer 2 Scaling

A core security feature where transaction data is made available for verification. Validity proofs (like ZK-SNARKs or ZK-STARKs) cryptographically guarantee the correctness of off-chain state transitions before submission to Layer 1. This enables trust-minimized scaling without requiring others to re-execute transactions.

• ZK-Rollups use validity proofs.
• The data must be published to Layer 1 so anyone can verify state integrity or reconstruct the chain.

A security model used by Optimistic Rollups that assumes transactions are valid by default. After a batch is posted, there is a challenge period (e.g., 7 days) where any watcher can submit a fraud proof to dispute invalid state transitions. This provides economic security but delays finality.

• Relies on at least one honest actor to monitor the chain.
• Withdrawals are delayed until the challenge window expires.

A scaling technique where a payment or state-update channel is opened between participants off-chain. Multiple transactions are exchanged privately, with only the final state (opening and closing balances) settled on the underlying blockchain.

• Enables instant finality and near-zero fees for participants.
• Ideal for high-frequency, bidirectional exchanges (e.g., micro-payments, gaming).
• Examples: Bitcoin's Lightning Network, Ethereum's Raiden.

Plasma is a framework for creating hierarchical child chains anchored to a main chain, using fraud proofs for security. Sidechains are independent blockchains with their own consensus (e.g., Proof of Authority) connected via a two-way bridge.

• Key Difference: Sidechains are responsible for their own security, while Plasma chains inherit security from the parent chain via exit mechanisms.
• Example Sidechain: Polygon PoS (formerly Matic).

Critical off-chain components that batch and process transactions. A sequencer (often centralized initially) orders transactions and submits compressed data to Layer 1. A prover (in ZK-Rollups) generates cryptographic validity proofs for those batches.

• The sequencer is a potential centralization point and single point of failure.
• Decentralized sequencer sets are a key area of development for censorship resistance.

Protocols that enable communication and asset transfer between a Layer 2 and its Layer 1 or other chains. Native bridges are the official, canonical bridge for a rollup (e.g., Arbitrum Bridge). Third-party bridges offer alternative liquidity routes.

• A critical security consideration; bridges are frequent attack targets.
• Messaging is essential for composability, allowing smart contracts on L1 and L2 to interact.

A scaling solution that assumes transactions are valid by default, executing them off-chain and posting only compressed data to the main chain. It uses a fraud-proof mechanism where a challenge period (typically 7 days) allows anyone to dispute invalid state transitions.

• Key Feature: High compatibility with the Ethereum Virtual Machine (EVM).
• Examples: Arbitrum One, Optimism.
• Trade-off: Users face a long withdrawal delay when moving assets back to Layer 1.

A scaling solution that bundles thousands of transactions off-chain and submits a cryptographic proof of their validity, called a ZK-SNARK or ZK-STARK, to the main chain. This provides immediate finality without a challenge period.

• Key Feature: Inherits the full security of the underlying Layer 1.
• Examples: zkSync Era, Starknet, Polygon zkEVM.
• Trade-off: Higher computational complexity for proof generation, though hardware is rapidly improving.

A scaling technique where participants lock funds in a multi-signature contract on the main chain, then conduct numerous fast, low-cost transactions off-chain. The final state is settled on-chain only when the channel is closed.

• Key Feature: Ideal for high-frequency, bidirectional interactions (e.g., gaming, micropayments).
• Mechanism: Uses smart contracts as adjudicators.
• Example: The Bitcoin Lightning Network is a payment channel network.

A framework for creating hierarchical sidechains (child chains) that periodically commit Merkle roots of their state to the main Ethereum chain. It relies on fraud proofs for security, allowing users to exit to the main chain if the operator acts maliciously.

• Key Feature: Can significantly reduce main chain congestion for specific applications.
• Challenge: Complex user experience for exits and data availability issues led to its decline in favor of rollups.
• Variant: Plasma Cash introduced non-fungible tokens to simplify proofs.

A hybrid scaling solution similar to ZK-Rollups, but data availability is kept off-chain by a committee of trusted parties or a proof-of-stake network, rather than posted to the main chain. This further increases throughput but introduces a data availability trust assumption.

• Key Feature: Extremely high transaction throughput and low fees.
• Security Model: Relies on the cryptographic validity of ZK proofs plus the honesty of the data availability committee.
• Examples: Immutable X (for NFTs), certain configurations of StarkEx.

Independent, EVM-compatible blockchains that run in parallel to Ethereum, connected via a bidirectional bridge. They have their own consensus mechanisms (e.g., Proof of Authority, Delegated Proof of Stake) and block parameters for higher speed and lower cost.

• Key Feature: Sovereign security and consensus, separate from Ethereum.
• Trade-off: Security is not derived from Ethereum; users must trust the sidechain's validator set.
• Examples: Polygon PoS, Gnosis Chain, SKALE.

Total Value Locked (TVL) is the primary metric for measuring capital commitment and security in Layer 2 ecosystems. It represents the sum of all assets deposited into a network's smart contracts for staking, bridging, or providing liquidity.

• Security Proxy: Higher TVL in Optimistic Rollups increases the economic cost of a successful fraud proof challenge.
• Ecosystem Health: TVL in DeFi protocols (e.g., Aave, Uniswap) indicates developer and user adoption.
• Leading Networks: As of late 2024, Arbitrum and Optimism consistently lead in TVL among general-purpose L2s.

The core value proposition of Layer 2s is realized in transactions per second (TPS) and reduced gas fees. Rollups batch thousands of transactions off-chain, submitting only compressed data or proofs to the base layer (L1).

• Throughput: ZK-Rollups like zkSync and StarkNet can achieve 2,000+ TPS, compared to Ethereum's ~15 TPS.
• Cost Reduction: Users often pay fees less than $0.01 per transaction, a 10-100x reduction from L1 mainnet costs during peak congestion.
• Fee Metrics: Average transaction fee and cost relative to L1 are key adoption indicators.

Ecosystem growth is driven by developer migration from Layer 1. Major decentralized applications (dApps) deploy canonical bridges and often launch native L2 versions.

• DeFi & NFTs: Protocols like Uniswap V3, Aave V3, and OpenSea have deployed on Arbitrum, Optimism, and Polygon zkEVM.
• Developer Tools: Full EVM equivalence (Optimism) or EVM compatibility (zkEVMs) allows developers to port contracts with minimal changes.
• Metrics: Number of verified contracts, unique deploying addresses, and dApp TVL measure developer traction.

Daily active addresses and transaction counts are direct measures of real user engagement, separating speculative activity from genuine usage.

• Onchain Activity: Networks like Arbitrum and Base frequently process more daily transactions than Ethereum mainnet.
• User Experience: Seamless bridging via official bridges (e.g., Arbitrum Bridge, Optimism Gateway) and third-party portals is critical for onboarding.
• Retention Metrics: The ratio of new to returning addresses indicates the stickiness of applications on the L2.

Beyond public DeFi and NFTs, Layer 2s enable enterprise adoption through privacy, compliance, and custom blockchain instances.

• AppChains & Supernets: Frameworks like Polygon Supernets and Arbitrum Orbit allow institutions to launch dedicated, application-specific L2 or L3 chains.
• Privacy Focus: Aztec Network uses zk-rollups for private transactions on Ethereum.
• Payments & Gaming: Stablecoin payment rails and blockchain gaming ecosystems (e.g., Immutable X) rely on L2 scaling for feasibility.

Adoption depends on interoperability. Users and assets must move freely between L1, various L2s, and other ecosystems via bridges and messaging protocols.

• Bridging Volume: The amount of assets bridged to an L2 signals initial capital inflow and user trust in its security model.
• Cross-L2 Communication: Protocols like LayerZero and Chainlink CCIP enable direct messaging and asset transfer between different rollups.
• Liquidity Fragmentation: A key challenge is ensuring liquidity is not siloed, which drives the need for cross-rollup liquidity pools and DEX aggregators.

A scaling technique where participants lock funds in a smart contract and conduct numerous fast, private transactions off-chain. Only the final state (opening and closing balances) is settled on the main chain. This is ideal for high-frequency, bidirectional interactions like micropayments or gaming.

• Example: The Lightning Network for Bitcoin.
• Key Property: Enables near-instant finality and extreme throughput for established participant groups.

Independent blockchains that run parallel to a main chain (Layer 1) and connect via a bidirectional bridge. They have their own consensus mechanisms (e.g., Proof of Authority) and block parameters, offering high throughput but differing security guarantees from the parent chain.

• Example: Polygon PoS (though it has evolved, it originated as a sidechain).
• Trade-off: Achieves scalability by sacrificing some of the base layer's decentralized security.

An earlier L2 framework for creating hierarchical trees of child chains anchored to the Ethereum main chain. It uses fraud proofs to ensure security but has limitations with data availability and generalized smart contracts. While largely superseded by rollups for general-purpose scaling, its concepts influenced later designs.

• Key Challenge: Mass exit problems during data withholding attacks.
• Evolution: Inspired Optimistic Rollups, which improved upon Plasma's model.

A critical security guarantee that the data needed to reconstruct a Layer 2's state is published and verifiably available to all participants. Without it, users cannot independently verify transactions or challenge invalid states.

• Data Availability Problem: If an operator withholds transaction data, the chain can become unverifiable.
• Solutions: Data Availability Committees (DACs), Data Availability Sampling (DAS), and Ethereum's Proto-Danksharding (EIP-4844) which introduces blobs.