Following a sharp rise in demand for decentralized applications (dApps), recent months have seen an unprecedented number of scaling solutions developed on the Ethereum blockchain. This includes protocols such as rollups, Plasma, state channels, and sharding. Ethereum scaling solutions created on top of the blockchain are referred to as ‘layer-2’ or ‘layer 2’ solutions. As there is no distinction between the two, we will be referring to both layer-2 and layer 2 scaling solutions throughout this article. There are various types of Ethereum layer 2 protocols, but how do they work? Also, how do layer-2 scaling solutions benefit the main Ethereum blockchain?
Ethereum 2.0 will trigger a seismic shift in the crypto space. Some of the changes that this upgrade is going to trigger are:
The transition to Casper protocol
Raiden state channels
Raiden and Plasma are layer-2 protocols that allow Ethereum to conduct thousands of transactions off-chain in the form of state channels and side chains. Plasma, in particular, can theoretically allow a side chain to process thousands of transactions and commit just one single hash to the main Ethereum blockchain. While this sounds pretty amazing on paper, there is a significant problem here. If there is some dispute in one of these side plasma chains, there isn’t a proper mechanism that the users can use to exit the protocol efficiently.
New and exciting DeFi projects launch all the time, and it can be difficult to keep up with them all. More specifically, understanding project fundamentals, the services they can offer to users, announcements of partnerships and integrations can all seem abstract. Matic Network, on the other hand, a Layer-2 scaling solution utilizing Plasma side chains, has a very concrete use case. Put simply, Matic Network is a scaling solution underpinning dApps and DeFi applications, addressing some of the Ethereum Network’s scalability challenges.