The Ethereum Layer 2 ecosystem continues to develop rapidly, with numerous scaling solutions making significant progress. Among them, Polygon has emerged as one of the fastest-moving networks, attracting many major DeFi protocols from Layer 1 to use its platform as a testing ground.
One of the most notable developments for user accessibility is the announcement from major cryptocurrency exchange OKEx that it will support deposits and withdrawals for the Arbitrum network. The decision for other exchanges to follow suit and which specific Layer 2 networks they will integrate will directly impact the overall user experience.
The ability for users to move assets directly from an exchange to an L2 network, conduct transactions, interact with DeFi applications, and then return to the exchange for fiat conversions creates a seamless closed-loop experience. This process bypasses the need to interact with the expensive Layer 1 network, significantly reducing costs.
A central tension exists, however, as many major exchanges have invested heavily in their own public chain ecosystems, such as Binance Smart Chain (BSC) and Huobi Eco Chain (HECO). Supporting Ethereum L2 networks could potentially redirect user assets and activity back to the Ethereum ecosystem, given its superior security and the drastic reduction in user fees. Yet, exchange-owned chains still hold advantages in transaction throughput and cost, meaning this competitive landscape is still evolving.
From a pure usability standpoint, the industry is hopeful that other exchanges will follow OKEx's lead in integrating Ethereum L2 support. Here’s a breakdown of the key updates from across the Layer 2 landscape.
Key Ethereum Layer 2 Scaling Solutions
Optimism: Network Regenesis and ENS MVP
The Optimism network underwent a significant "Regenesis" of its testnet in April. The team decided a fresh start was the best way to mitigate potential risks associated with preserving historical transaction data. The entire state of the network was deployed to a new genesis block.
While Uniswap had previously suggested its V3 version would launch on Optimism around mid-May, no specific update was provided during its recent L1 launch. In a positive development, the Ethereum Name Service (ENS) demonstrated a Minimum Viable Product (MVP) for resolving .eth domains on Optimism, showcasing a new system for trustless communication between L1 and L2.
Arbitrum: Exchange Integration and Mainnet Launch
A major milestone was OKEx's announcement of support for Arbitrum, allowing users to deposit and withdraw assets directly to the L2 network without incurring Ethereum gas fees. This integration is a significant step toward alleviating Ethereum congestion.
Arbitrum also confirmed its mainnet would open to developers on May 28th, following a final testing phase. This marks a crucial step toward its full public launch.
zkSync: Introducing zkPorter and Token Economics
Matter Labs unveiled zkPorter, a new scaling solution designed to work in parallel with zkSync 2.0. zkPorter offers drastically higher throughput and fees that are just a fraction of those on zkSync. This performance gain comes from adopting a Validium model, where data availability is managed off-chain by a network of guardians using a Proof-of-Stake mechanism with the native zkSync token.
This design choice sparked debate. Ethereum co-founder Vitalik Buterin expressed a preference for the security model of Optimistic Rollups, which keep data on-chain, over any system relying on off-chain data availability, stating he would rather place assets in an Optimistic Rollup.
StarkNet/StarkEx: Surging Volume and NFT Marketplace
StarkEx, the scalable engine powering applications like dYdX, DeversiFi, and Immutable, has surpassed $1 billion in total transaction volume. Furthermore, its NFT-centric platform, Immutable X, launched its alpha version, starting with support for the blockchain game Gods Unchained.
Loopring: iOS Wallet and Ethport Bridge
Loopring Protocol announced Ethport, a new bridge product designed to connect Layer 1, Layer 2, and centralized exchanges (CEXs). This tool will enable Loopring's ZK Rollup users to interact with L1 applications at a much lower cost. The project also released its iOS smart wallet, featuring social recovery and daily transfer limits.
Polygon: DeFi Onboarding and $100M Fund
Formerly Matic Network, Polygon continues to aggressively onboard DeFi protocols like Instadapp, Curve, and Aave. The network also unveiled a $100 million "DeFiForAll Fund" to support further development and adoption on its platform over the next few years.
Other Notable Layer 2 Progress
- Celer: Launched the first version of its Layer2.finance product on mainnet and announced a partnership with StarkWare to develop a ZK Rollup version using Cairo programming language.
- Aztec: The privacy-focused rollup, zk.money, added support for the DAI stablecoin.
- Hermez: Conducted its first airdrop of HEZ tokens to Gitcoin donors.
- Connext & The Graph: Collaborated on Scalar, a micropayment solution for handling query fees on The Graph network.
- Aurora (NEAR): This EVM-compatible chain built on the NEAR protocol launched, offering developers a path to scale their Ethereum dApps.
Frequently Asked Questions
What is a Layer 2 solution?
Layer 2 solutions are protocols built on top of a blockchain (Layer 1) like Ethereum to improve its scalability and efficiency. They process transactions off-chain or in a more optimized way before settling the final state on the main chain, thereby reducing fees and increasing transaction speed.
Why is OKEx's support for Arbitrum important?
OKEx's integration allows users to move funds directly from the exchange to the Arbitrum L2 network and back without interacting with the expensive Ethereum mainnet. This creates a seamless and cheap user experience, which is critical for the mass adoption of DeFi and other blockchain applications.
What is the difference between a Rollup and a Validium?
Both are Layer 2 scaling techniques. Rollups (like Optimistic and ZK Rollups) execute transactions off-chain but post transaction data to the Ethereum mainnet for security. Validiums also execute off-chain but keep data off-chain, using proofs to secure the network. This makes Validiums faster and cheaper but introduces different security assumptions regarding data availability. For a deeper understanding of how these technologies work in practice, you can explore more strategies on advanced scaling.
How do I start using Layer 2 networks?
To use an L2, you typically need to bridge your assets from Ethereum Mainnet to the L2 network using a gateway or bridge contract. This process requires paying gas fees on L1. With exchange integrations like OKEx's, this step is bypassed, allowing direct deposits.
Are Layer 2 solutions secure?
Security varies by design. Rollups are generally considered very secure as they inherit security from the Ethereum mainnet through published data. Validiums and other models rely on alternative data availability mechanisms, which have different security trade-offs. It's important to research the specific security model of each L2.
Will Layer 2 make exchange chains like BSC obsolete?
Not necessarily. They serve different needs and markets. L2s offer a path to scale Ethereum with strong security guarantees. Exchange chains often provide very low fees and high throughput but with a different decentralization and security model. The ecosystem will likely see both coexist, serving different user preferences. To see real-time metrics across different networks, view real-time tools that track performance and activity.