Analysis of Layer2 and Optimistic Tracks

Introduction

In the previous article, we briefly introduced the development history of Ethereum and the basic information about the Ethereum 2.0 upgrade, extending to the two main sub-tracks of Layer 2: Optimistic Rollup and ZK Rollup. If we compare Ethereum to a company, we can simply understand that the Ethereum 2.0 upgrade is a reconstruction of the internal management structure of the company, transforming from the original chain structure into a total and sub-structure of Beacon Chain - Shards (Shards), while Layer 2 further outsources the tasks to be executed on this total and sub-structure to alleviate the company's burden, improve efficiency, and enhance overall task processing capabilities.

This article will further explore Layer 2 solutions and conduct an in-depth analysis of the Optimistic Rollup track.

Overview of Layer2 Solutions

To understand Layer 2 scaling solutions, we first need to clarify the concept of Layer 2.

Layer 2 refers to off-chain networks, systems, or technologies based on the underlying blockchain (, also known as Layer 1), used to expand the underlying blockchain network. Currently, there are two classifications of Layer 2 in the market: the narrow definition of Layer 2 needs to inherit the security of the Ethereum chain and bundle transactions with Layer 2 Ethereum, while Layer 2 is only responsible for computation, with ZK and Optimistic rollup being the orthodox Layer 2; the broad definition of Layer 2 includes all Ethereum scaling solutions, mainly comprising the following five types:

1. Sidechain: An independent blockchain that operates in parallel with Ethereum, locking a certain amount of assets in the smart contract of the main chain, and then minting the same amount of assets on the sidechain, achieving "atomic swaps". The biggest issue with sidechain solutions is weak security, but they offer great independence and flexibility, with Polygon being a representative of Ethereum sidechains.

2. State Channels: By establishing exclusive payment channels and multi-signature addresses between traders, off-chain transactions are completed, and only when settlement is needed, the final calculation results are recorded on the chain, featuring fast speed and low transaction fees. Representative technologies include the Lightning Network and the Raiden Network.

3. Rollups: By "outsourcing" data execution work to Layer 2 and batching submissions to the main chain, mainly divided into two types: Optimistic Rollup and ZK Rollup.

4. Validium: Uses zero-knowledge proofs, but unlike ZK Rollup, it only uploads the state root and zero-knowledge proofs to the mainnet, while transaction data is stored on Layer 2, thus achieving higher throughput at the cost of some security.

5. Plasma: A framework solution for Ethereum Layer 2 scaling, also known as "chain of chains". By locking assets on the main chain and transferring transactions to the child chain, the child chain periodically submits state updates to the main chain.

This article will focus on the sidechain solution Polygon PoS, the two main projects of Optimistic Rollup, Arbitrum and Optimism, as well as the BNB ecosystem project opBNB and COMBO, which is both an Ethereum clone and an Optimistic Rollup.

Polygon PoS Analysis

Introduction to Polygon

Polygon, originally named Matic, was initially a blockchain scalability platform known as "the blockchain internet of Ethereum". As the ecosystem has continuously developed, the platform has expanded from a single Layer 2 solution to a "network of networks", aimed at addressing the transaction speed and scalability issues of the Ethereum mainnet, and primarily focusing on areas such as blockchain gaming and NFTs.

technology

Polygon PoS, although based on Ethereum, benefits from faster speeds and higher scalability, with its transaction volume consistently over twice that of the Ethereum mainnet (, approximately 2 million daily transactions ), while the gas fees are only 0.1% of those on Ethereum.

Polygon PoS is an EVM-compatible sidechain that launched on June 1, 2020, and is currently the main business of Polygon. The overall architecture of Polygon PoS can be divided into three layers:

1. Ethereum Layer: Composed of a series of Ethereum smart contracts, responsible for handling processing flows on Ethereum.

2. PoS Checkpoint Node Layer: The core layer of Polygon, responsible for producing and validating blocks of the Matic sidechain.

3. Matic Sidechain Layer: Responsible for transactions, shuffling, block formation, and regularly publishing checkpoints to the Node Layer.

Ecology

Polygon was launched in 2020 and entered its explosive growth phase in Q2 2021, becoming the third public chain with a complete ecosystem after Ethereum and BNB. By the first quarter of 2023, the number of projects in the Polygon ecosystem has exceeded 53,000.

In terms of DeFi, NFTs, gaming, and the metaverse, Polygon has performed impressively. For example, when leading DeFi projects like Uniswap, Aave, and Curve deployed on multiple chains, their first stop was Polygon. In the NFT space, many international brands such as Starbucks, Mastercard, and Adidas launched their own NFTs on Polygon. In gaming and the metaverse, the number of active gaming projects on the Polygon chain reached 468, ranking third after BNB and Ethereum.

Summary of Advantages and Disadvantages

The advantages of Polygon PoS include:

• Fast: Transaction speed of up to 7000 tps
• High security: relies on Ethereum and shares its security
• Good compatibility: complete EVM compatibility
• Low cost: about 0.1% of Ethereum

The timing of Polygon PoS's market entry was just right, launching in 2020 when the Ethereum network was experiencing congestion and scalability issues, meeting market demand. Although the rise of second-layer star projects like Arbitrum, Optimism, and zkSync will affect Polygon's market landscape, Polygon itself is also continuously evolving and fully embracing the ZK track.

Arbitrum Project Analysis

Introduction to Arbitrum

Arbitrum, as a leading Layer 2 project, has always been in the spotlight. During the token issuance period in the first half of 2023, it became one of the hottest topics in the blockchain community. Arbitrum's total locked value ranks fourth after ETH, BSC, and TRON, having already surpassed the well-established Layer 2 sidechain Polygon.

Arbitrum launched the Arbitrum One mainnet in May 2021 and introduced the public testnet of Arbitrum Nova in October 2021. In 2022, the Arbitrum Orbit plan is set to advance steadily, aiming to provide dedicated Layer 2 solutions for NFT and virtual reality applications.

Technology

Arbitrum is a layer 2 scalability solution that adopts the Optimistic Rollup technology approach. The system introduces two different roles to ensure the transaction process: Verifier( and Manager). The verifier is responsible for processing transactions and receiving Ethereum as a reward, while the manager is responsible for monitoring whether the verifier executed the transactions correctly.

Arbitrum's main product line includes:

1. Arbitrum One: Based on Optimistic Rollup technology, it provides fast and low-cost execution of smart contracts.

2. Arbitrum Nova: Uses zk-Rollup technology to verify transactions through zero-knowledge proofs, enhancing security and efficiency.

3. Arbitrum Orbit: Arbitrum's ecosystem development plan aims to provide tools, libraries, and support to facilitate developers in building applications.

( Ecology

The Arbitrum ecosystem has reached 600 projects, featuring numerous excellent ecosystem projects such as GMX, Radiant, TreasureDAO, Camelot, etc. Among them, game projects like Treasure DAO and Pirate Nation have seen explosive growth in data, bringing immense activity to Arbitrum.

) Summary of Advantages and Disadvantages

The advantages of Arbitrum include:

• High performance: Increased transaction throughput and reduced costs
• Low cost: Significantly reduces Gas fees
• Compatibility: Compatible with Ethereum smart contracts
• Security: Utilizes security measures expanded by Layer 2
• Ecosystem support: Attracted well-known projects within the Ethereum ecosystem

Disadvantages of Arbitrum include:

• Higher degree of centralization
• New user learning curve
• The network effect takes time to establish.

![GameFi Public Chain Research (2): Layer 2 and Optimistic Tracks]###https://img-cdn.gateio.im/webp-social/moments-8436eea91a83a3066084b2587605f98d.webp###

Optimism Project Analysis

( Introduction to Optimism

Optimism is an Ethereum Layer 2 solution that moves transfers, smart contracts, and other processes to the Optimism chain, recording only the final processed results on Ethereum, significantly reducing the transaction fees for each transaction.

The Optimism project was launched in early 2020 and released its white paper, with the testnet launched at the end of 2020. At the end of 2021, the Optimism mainnet officially went live, marking the launch of the first legitimate Layer 2 scaling solution on Ethereum.

) technology

The core technology of Optimism is the OP Stack, which is a set of open-source software components that allows anyone to build their own L2 blockchain on Ethereum using Optimistic Rollup. The OP Stack consists of four main components:

1. Mainnet: The OP Mainnet is a low-cost and fast Ethereum L2 network that is EVM compatible.

2. Contract: Smart contracts that implement the core logic and functionality of the OP Stack.

3. Services: Providing data availability, synchronization, and communication services between L1 and L2.

4. Tools: Tools used to facilitate the development, testing, deployment, monitoring, and debugging of blockchain based on OP Stack.

![GameFi Public Chain Research (II): Layer 2 and Optimistic Tracks]###https://img-cdn.gateio.im/webp-social/moments-b09d061968a13c5dec2c9c8be4cd6307.webp###

( Ecology

The DeFi ecosystem of Optimism is relatively complete, with decentralized exchanges, lending, and more all available. For example, Velodrome is the largest DEX on OP, and Sonne Finance is the native lending platform of OP.

In the GameFi field, the advantageous project of Optimism is OP Craft, which is developed based on the OP Stack. This is a new full-chain gaming paradigm known as Onchain Autonomous World).

Summary of Advantages and Disadvantages

The advantages of Optimism include:

• EVM equivalence: Highly compatible with EVM
• Data security: Obtained security from the Ethereum mainnet
• Speed: Capable of achieving 10-100 times scalability improvement
• Cost: The transaction cost is only about 1% of the Ethereum transaction cost.

The disadvantages of Optimism include:

• Withdrawal time is long and costs are high.
• Potential misalignment of incentives among network participants
• Layer 1 review transactions

Analysis of opBNB and COMBO Projects

opBNB

opBNB is a layer two network on BSC built on OP Stack technology, aimed at addressing the scalability issues of BSC. opBNB raises the Gas limit to 100M, surpassing Optimism's 30M Gas limit, capable of processing over 4000 transactions per second, with an average transaction cost of less than $0.005.

( COMBO

COMBO is a Layer 2 network focused on Web3 gaming, built on the BNB Chain, utilizing Optimistic Rollup technology. COMBO can achieve speeds of up to 5,000 TPS, with gas fees as low as 0.001 Gwei. COMBO provides game developers with a comprehensive suite of on-chain development tools, including a full-stack development kit, ComboUp, and Web3 gaming solutions and ecosystem.

The ecological layout of COMBO revolves around the gaming and metaverse track, supported by heavyweight metaverse projects such as Lifeform, Ultiverse, and SecondLive. The project has raised a total of 40 million USD so far, with Binance leading the investment of 12 million USD.

![GameFi Public Chain Research (II): Layer 2 and Optimistic Track])https://img-cdn.gateio.im/webp-social/moments-b6dd7150a0d4bb0dfc7ddcec9f988441.webp###

Summary

This article analyzes Polygon PoS based on sidechain technology, Arbitrum and Optimism based on Optimistic Rollup technology, as well as opBNB and COMBO, which also use Optimistic Rollup technology but belong to the BNB ecosystem.

Overall, Rollup is the mainstream solution in the Layer 2 track, with significant improvements in security, speed, scalability, and cost compared to the original Layer 1 mainnet. However, the Rollup solution also has some issues, such as withdrawal delays caused by the OP challenge period, low interoperability caused by cross-chain bridges, a limited variety of supported assets, fragmented asset liquidity, and centralized ordering.