There are a number of solutions available right now that take us off the main Ethereum chain and allow us to run DeFi apps at a fraction of the cost. Because these scaling solutions execute transactions and computations of the main Ethereum chain, they’re able to do it much more quickly and efficiently. No more failed transactions.
Scaling Solution Types
These are separate and independent blockchains that run next to the main Ethereum chain. These chains will only interact with the main chain when it comes to updating the state of the ledger. Given that these are independent blockchains, they rely on their own security and consensus mechanisms. This means that they can choose a consensus mechanism that is much faster than Ethereum’s proof of work. These include proof-of-stake or delegated proof-of-stake. These side chains are also Ethereum compatible.
Layer 2 Protocols
There are quite a few Layer 2 Protocols on the market. These include Plasma Network and Rollups. Plasma uses a child chain architecture. Rollups are the most popular with Eth holders. Roll-ups are an off-chain aggregation of transactions that exist all within an Ethereum smart contract. It’s in this smart contract that users can transact with reduced fees and congestion. They are all compatible with already established smart contracts on the Ethereum network. This means that the most popular dapps can easily be deployed and have a rapid impact on reducing congestion on the main chain.
This is perhaps the most well-known scaling solution out there. This is a sidechain solution that has its own token, which supports a proof-of-stake blockchain. Validators on the Polygon network will secure the side chain and will submit the state of the network back to the Ethereum main chain. Since polygon launched earlier this year, we’ve seen an explosion in total value locked on the network. A few months ago it was one of the most popular Ethereum scaling solutions. Some of the best-known Ethereum dapps have already been built onto the Polygon network.
If you want to use the polygon network, you have to bridge your ETH over. There are two bridges currently available and they are the Proof of Stake bridge and the Plasma bridge. The proof of stake bridge is the recommended one. The Matic that you receive in return for your eth is going to be used as gas within the Polygon ecosystem. When compared to Eth, the gas fees are pretty minimal, and the experience is truly seamless. Polygon recently had one of the largest network mergers in the crypto space with the Hermes network. The network will be rebranded Polygon Hermes and ZK Rollups will be implemented.
It was developed by Optimism Labs, which received 25 million dollars from Series A Funding led by Andreessen Horowitz. Optimism launched in July, and one of the first apps that it was integrated with, was Uniswap. It was able to do this so quickly because Uniswap had been working on a proof of concept for optimistic Ethereum called Unipig.
How do you use Optimism? Since this is a Layer 2 Solution, you’ll have to migrate your Layer 1 assets over to Layer 2 using a gateway. This can be done from the Optimism Homepage at optimism.io All you need to do is connect your web3 wallet by hitting connect and selecting which wallet you use. You’ll see the option to send your ETH from the main net to the Optimistic Ethereum network. Hit the deposit button, confirm the deposit and you’ll have to sign in with your Metamask and confirm the gas fee.
Once this is done, the balance should take about 5 – 20 minutes to arrive on Optimistic Ethereum. When the deposit has been fully confirmed you can start using Optimistic Ethereum. If you’ve not already you’re going to want to switch to the Optimistic Ethereum network from the mainnet. You can also bridge over other ERC20 assets using the gateway. If you switch back to the Optimistic Ethereum network, you may not see it in your wallet. That’s because you’ve not added the assets. You can do this just like you would any custom ERC20 asset on the mainnet. Here is a list of supported tokens on Optimistic and their contracts addresses.
Arbitrum is a scaling solution that was built by a startup called Offchain Labs. It was announced that Offchain Labs raised 120 million dollars in order to build Arbitrary. Numerous Ethereum developers have been working to integrate their dapps with Arbitrum. Once these dapps went live the tvl (total volume locked) on Arbitrary exploded. In under a week, we went from less than 50 million dollars to over 2 billion. That’S a 3200 percent increase in tvl. Arbitrum is an Optimistic Rollup layer 2 solution. It uses a challenge period on the withdrawal, just like Optimism but it’s able to achieve higher transaction capacity.
How do you use Arbitrum?
Navigate to their homepage via this link bridge.arbitrum.io Metamask is the only supported wallet at this stage. The Arbitrary bridge differs from the Optimistic bridge in appearance but performs the same function. You can either transfer Eth or ERC20 assets from layer 1 to layer 2. After confirming your deposit on Metamask you have to wait a few minutes for the transaction to process. Once it’s been deposited on both layer 1 and layer 2 you’re ready to start using it. You will need to connect to the Arbitrary network in order to do so. You can automatically switch over by hitting the “Add/Switch to Arbitrum Network” option on the bridge page. You can confirm this both on the bridge page as well as checking into your Metamask.
Uniswap was one of the first apps to integrate with Arbitrum. The price impact with Arbitrum is better than on Optimism. Here is a list of supported Arbitrum tokens.