There is a lot of talk about how blockchain opens up endless possibilities for businesses. And while all that excitement has yet to produce tangible results, the explosion in decentralized financial markets and the clear symbol market (NFT) has provided an example of what can be achieved and how blockchain can truly impact even the most conservative of industries.
There is a lot of talk about how blockchain opens up endless possibilities for businesses. And while all that excitement has yet to produce tangible results, the explosion in decentralized financial markets and the clear symbol market (NFT) has provided an example of what can be achieved and how blockchain can truly impact even the most conservative of industries. Unlike in two to four years, developers, entrepreneurs and companies don't just join in blindly. It's no longer about what the blockchain can do. The question is now more about how to best use technology for the best results. Therefore, blockchain is slowly evolving from a buzzword to a widely accepted technology. If it doesn't show real growth and development, what does it do?
However, that doesn't mean it's been smooth sailing so far. Since we started seeing blockchain as a viable technology to support mass applications, the performance of blockchain, especially the widely accepted one, has been under intense scrutiny. Understandably, scalability remains the criterion for judging the willingness of a blockchain network to accept enterprise applications. Using Ethereum as a case study, it's safe to say that many Ethereum users have dealt firsthand with the lack of a scalable blockchain infrastructure. In my experience, high transaction costs due to network congestion are a potential nuisance factor for retail investors. There's no way for the average consumer to justify paying up to $ 70 as a transaction fee, which might not even cost up to $ 100.
In particular, Ethereum's inability to scale to any degree is holding back the creation of the DeFi and NFT sectors, with retail investors and traders interested in low-value transactions often forced to look sideways. Even Vitalik Buterin recently realized the gravity of the situation, noting that the current scale and fee system is unsustainable if the goal is for NFT-powered social networking projects to thrive on the Ethereum network. Is the first layer enough? I believe the ultimate goal is to solve the trilemma of blockchain, which is to strike a balance between decentralization, security and scalability. Blockchains often have to do without any of these three functions. In most legacy blockchains, including Bitcoin and Ethereum, the infrastructure design inherits security scalability and decentralization.
It must be said that Bitcoin and Ethereum are the two most popular blockchains, not only because they are the first of their kind, but also because they have established themselves as the most decentralized and secure blockchain networks. Basically, they compensate for their lack of scalability in other basic blockchain requirements. While this was sufficient in their early years of operation, the influx of blockchain applications has certainly put tremendous pressure on Layer 1 chains to develop and integrate infrastructure geared towards scalability. While it is easier for newer blockchains to adapt by deploying a scalable infrastructure from scratch, it is much more difficult for those with existing infrastructure to do the same. As can be seen in the case of Ethereum, this could lead to a complete overhaul of the existing infrastructure. Moving the existing billion-dollar blockchain economy to a new blockchain infrastructure carries risks. A lot can go wrong, especially since it has never been seen on such a scale.
Therefore, it is usually obvious for DApp developers and users to opt for scalable circuits with a focus on Layer 1, with mentions of Binance Smart Chain, Tron and EOS. However, as we have discovered, at first glance, decentralization is not the strongest option for this opportunity. Given the blockchain trilemma mentioned above, most Ethereum and Bitcoin alternatives have opted for speed over decentralization. So, it's a matter of preference and willingness to compromise on the part of the developer. Perhaps the third and cheaper option is to use a second-tier solution. With this, developers can at least determine that they have access to all the parts and components needed to create optimal blockchain applications.
Are second-tier solutions a direct answer to the blockchain trilemma?
Ethereum's lack of blockchain scalability has forced the decision to build a network on top of the existing one and take over some transactions and load computations, clogging up the core network. The layered approach ensures that developers continue to enjoy the high liquidity of the Ethereum blockchain and still avoid bottlenecks in the ecosystem. The idea is to perform all scalable computations and payments off-chain and periodically record the final state of the activity in layer 1 of the blockchain, be it optimistic count, status channel, plasma or zero knowledge amount (zk shrinkage).), The goal remains the same: to remove the obvious limitations of decentralized blockchains.
Polygon (formerly Matic) has received a lot of approval as a second layer solution, ideal for Ethereum applications looking to enable a scalable platform without network bottlenecks. According to DappRadar, SushiSwap's polygon version of Sushi recorded a 75% increase in user numbers in the first week of September. With the exception of the recent immersion in Polygon's operations, which I believe to be a passing flaw, consumers have realized the opportunities that secondary solutions offer, especially when it comes to DeFi retail.
Interestingly, it's not just the DeFi sector that is experiencing this dynamic change. The NFT market has also begun to migrate to the second tier with a custom solution that is reported to save more than $400,000 in gas costs just 24 hours after launch. In July, OpenSea announced that it had integrated with Polygon to enable gas-free transactions on its NFT market. Note that polygons are not the only Layer 2 solution creating waves at this point. Other second-tier infrastructures that are making a big fuss are the Celer and Arbitrum Networks.
The influx of second-tier adoption has led me to believe that developers have withdrawn to a layered blockchain infrastructure as the ideal architecture for creating premium blockchain experiences. If this trend continues, which appears to be very secure, at least until Ethereum 2.0 comes online, Layer 2 applications will become as valuable as their Layer 1 counterparts. Therefore, joining a Layer 2 party is a reasonable option for developers looking to seek improvements to the infrastructure. existing blockchain or create new decentralized applications.