Layer-2 Web3 Protocols That Could Challenge Ethereum Scalability & Security Jan 2023

2 min read

layer-2 blockchain

Despite the success of Ethereum, many other layer-2 web3 protocols have the potential to challenge the decentralized currency and become the new leader in the digital currency market. These layers include Layer 1 blockchains, which will challenge Ethereum’s current iteration process.

Ethereum’s Current Iteration Processes Around 15 Transactions Per Second

When the Ethereum network reached its current capacity of fifteen transactions per second, it faced a significant challenge. This congested environment made it difficult for applications to run on the web. A solution was needed to eliminate the congestion. Fortunately, several options can be considered.

These solutions will help to enhance scalability and increase the speed of transactions. They also solve some of the scalability challenges associated with decentralization and security. Several of these applications are already live on the Ethereum mainnet, including Hermez and ZK roll-ups. However, the competitive landscape for these networks is still unknown.

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Other potential solutions have been in development for years. Some of these include sidechains and validiums. While they offer high throughput and security, they are not considered the proper layer two and may be prone to security threats.

Roll-ups are a decentralized solution that performs hundreds of transactions outside the Ethereum mainnet. The roll-up acts as a sort of bar tab. It runs computation using available state data allowing for a quick confirmation, but it can take a long time to exit.

On the other hand, sidechains are a decentralized system of independent EVM-compatible blockchains. The sidechains interact with the mainnet through a bridge. Those who operate on the sidechains do not get the security of the main chain, but they benefit from scalability.

Related: Layer 2 protocol proof of stake validator

Ethereum 2.0 Needs to be Scalable, Secure, and Decentralised

The Ethereum community has been working on the Ethereum 2.0 upgrade to make it more scalable, secure, and decentralized. The upgrade is intended to improve security, scalability, and energy efficiency. It will also increase the number of transactions processed on the network.

Vitalik Buterin, the co-founder of the Ethereum blockchain, leads the team behind the upgrade. He says the new version is “a complete overhaul” of the original protocol.

The first step in achieving scalability is to reduce network congestion. This will help speed up transaction speeds and improve the user experience.

Another way to increase scalability is to share the network, allowing multiple blocks to be processed simultaneously. Sharding does not decrease the number of nodes; however, it does spread the load among the network’s 64 chains.

Finally, the Proof of Stake consensus algorithm is another essential part of the upgrade. Instead of using the PoW algorithm, which uses a lot of energy, the platform will implement a Proof of Stake (PoS) algorithm.

Using the Proof of Stake consensus algorithm will improve scalability. Also, it is a more energy-efficient method than the PoW method.

As a result, the energy usage of the Ethereum network will decrease. And energy consumption is one of the biggest concerns of the crypto community.

New Layer 1 Blockchains to Challenge Ethereum in the Long Term

New, scalable blockchains are gaining investors’ attention as a potential replacement for Ethereum in the long run. These new networks are based on different algorithms and have their use cases. They have attracted substantial investment from investors due to the demand for solutions to Ethereum’s problems.

Various scaling solutions are being tested to overcome the challenges of the “Blockchain Trilemma.” It’s important to note that the primary purpose of scalability is not to sacrifice security. The main goal of scalability is to increase the number of transactions processed through the network.

Some of these solutions derive security directly from the layer 1 Ethereum consensus. Others rely on the Proof of History and Proof of Stake consensus mechanisms. Still others, such as Avalanche, use a combination of both.

Most of these solutions are designed to handle transactions off of the Mainnet. This allows them to reduce congestion in any part of the network. However, the transaction fees will increase with the volume of transactions.

Currently, Ethereum is the leading smart contract platform in the web3. But with the emergence of new Layer 1 blockchains, it’s becoming increasingly difficult to predict where the competition will pop up.

These new networks are centered mainly around servers and clusters of servers. Each of them might be operated by a single project, or a third-party operator might run them.

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