The Gas Fee problem and its limited TPS are the biggest problems affecting the popularity and large-scale implementation of public chains. Therefore, the expansion solution in the form of Layer 2 emerged as the times require. Layer2 technology has gone through the development process of state channels, Plasma, and Rollup. Each technological change is an iteration and improvement of the previous generation technology.
Since the scalability of OP still does not meet the requirements and the exit period is too long, the latest roadmap of ETH currently revolves around the upgrade route centered on ZK Rollup, including Optimism, which currently uses OP technology and is also actively exploring OP+ZK hybrid Proof plan. But for now, Optimistic Rollups still occupies the largest market share, and the growth and development of zk-Rollups will also take time to verify.
1. Layer2 track overview
Looking at the Layer2 track, the current competition is very fierce. The TVL rankings of those that have been launched on the main network are as follows:
The Layer2 part in the test network stage is as follows:
Judging from the data, OP technology still accounts for the majority of TVL in Layer 2 that has been launched on the main network. This is mainly because of the good user experience and high TPS of OP technology, which allows this type of Layer 2 to firmly occupy the first-mover advantage in the ecosystem.
2、Optimistic Rollups 和 zk-Rollups
2.1 Optimistic Rollups
Optimistic Rollups is a second-layer expansion solution based on optimistic verification, that is, the blocks submitted by default are correct unless someone questions it. It also requires RollupOperator to aggregate many off-chain transactions into a batch, then calculate the new status generated by the batch transaction (such as balance, contract status, etc.) and generate an off-chain status update, and then update the off-chain status and related data Submitted to the main chain, this status is correct by default and does not require additional verification; however, after the status update is submitted, there will be a fixed challenge period, during which anyone can challenge the submitted status update by providing proof of fraud. The validity of the entire transaction related to the questioned state will be verified by EVM operation. If the state update is proved to be wrong, the submitter will be punished (deduction of deposit), and the on-chain state will be rolled back to the correct state; if If no one questions the status update during the challenge period, or the question is proven wrong, the on-chain status will be updated based on the submitted status update.
2.2 ZK-Rollups
zk-Rollups is a layer-2 expansion solution based on zero-knowledge proof. First, the RollupOperator component aggregates multiple off-chain transactions into a batch, and then uses zero-knowledge proofs (such as zk-SNARKS or zk-STARKs) to generate a concise proof file. This proof can verify the validity of the entire batch of transactions. , without checking each transaction one by one; then submit the certificate and related data to the main chain, and the main chain will verify the correctness of the certificate to ensure that the transaction is valid; after the main chain verification is passed, the contract on the chain will be based on the certificate The data updates the status on the chain. This means that although the transaction is performed off-chain, the on-chain state is still updated, ensuring data consistency.
Note: Zero-KnowledgeProof (ZKP) is a cryptographic concept that allows a prover to prove to a verifier that a certain statement is true without revealing any other information about the statement. In short, a zero-knowledge proof allows a person to prove that he or she possesses certain information without revealing the information itself.
2.3 Comparative analysis of ZK and OP
ZK and OP each have their own characteristics. I analyzed them from the following 5 different angles for you to judge according to your own tendencies:
Ways of identifying:
The OP verifies transactions through fraud proofs, assuming that the transaction is valid by default unless someone submits evidence to prove that a transaction is invalid. This requires continuous monitoring by off-chain users and nodes to ensure that the RollupOperator is not doing evil;
ZK verifies transactions through zero-knowledge proofs (such as zk-SNARKs or zk-STARKs). ZK generates a concise proof to ensure the validity of transactions in the batch without checking each transaction one by one;
safety:
The OP assumes that the transaction is valid by default, and there may be certain security risks. Off-chain users and nodes need to actively monitor transactions to ensure security;
ZK’s verification method is based on zero-knowledge proof, which provides it with higher security because it needs to generate a proof to ensure that the transaction is valid;
Throughput and performance:
OP has faster off-chain transaction processing speed, but on-chain verification may take longer because of the challenge cycle of waiting for fraud proof;
ZK requires certain computing resources to generate zero-knowledge proofs, but on-chain verification is faster. Once the proof is generated on the main chain, it can be quickly verified;
Versatility:
OP is fully compatible with EVM, many DAPPs can be directly migrated, the calculation complexity is low, and it is suitable for general smart contract execution and complex calculations;
ZK technology is still under development, and its application in general smart contracts and complex calculations is currently subject to certain limitations;
cost:
OP has lower off-chain transaction costs;
ZK requires certain computing resources to generate zero-knowledge proofs, which may result in higher off-chain transaction costs;
In general, Optimistic Rollups and zk-Rollups have their own advantages and disadvantages respectively. Optimistic Rollups is more suitable for handling complex energy contract scenarios and has better Ethereum compatibility; while zk-Rollups has better security and privacy protection. Advantage. Although due to the inherent shortcomings of OP technology, Ethereum has a development trend of expanding around ZK technology, technology iteration does not happen overnight. Layer 2 of OP technology is also developing OP+ZK hybrid proof technology. It is still unresolved whether OP or ZK will dominate the future. .
3. Layer2 track data analysis
ZK or OP has always been the focus of discussion or debate, but in the end it still depends on the market’s choice. Let’s take a look at the detailed status of the Layer 2 track from the data dimensions of transaction volume, TVL, TPS, etc.
3.1 The transaction volume on Layer2 chain far exceeds that of the main network
The total daily transaction volume of Layer 2 has greatly surpassed the Ethereum main network. It is expected that with the continued development of Layer 2, this trend will continue in the future. Especially after the Dencun upgrade, future Ethereum transactions will be divided into traditional transaction calldata Storage, Rollup's transaction blob storage, EIP-4844 is expected to expand the overall capacity of Rollup by 3-5 times. The author predicts that as the Dencun upgrade approaches, the ETH/BTC exchange rate will also rise, so it is worth paying attention to the changes in data on the Layer2 chain.
3.2 TVL and market share
In terms of TVL, Arbitrum has steadily occupied about 50% of the market share, and was able to occupy about 65% of the market share at its peak. The second and third places are OP and Base respectively. All three are Rollup of OP technology.
Although Arbitrum TVL reached an all-time high of $8.48 billion on December 09, 2023, its market share has been declining, mainly due to the strong rise in OP and the dilution of multiple Layer2 mainnet launches. OP’s circulating market value of US$2 billion also exceeds Arbitrum’s US$1.3 billion circulating market value. In terms of full circulating market value, OP is only about 1 billion less than ARB. The market is more optimistic about OP’s future than Arbitrum, and its pricing is also slightly higher.
Base's TVL has been improved recently, mainly due to the Seamless of the Base chain. Coinbase announced the launch of the Base ecological lending protocol Seamless Protocol governance token SEAM. SEAM will become the first and currently the only Base ecological native project traded on Coinbase. Token. Therefore, a large number of users have generated interactive airdrop pre-projects for the Base chain.
3.3 Layer2 profit and trend analysis
In the past three months, compared with other projects, Linea has generated more gas. The main reason is that Linea's technology is still in the iterative process and the overall gas fee is not ideal. From a peak perspective, zkSync Era contributes more Gas, and the main source is the expected interaction with airdrops.
At present, the overall profit model of Layer2 is not clear. As a public infrastructure, it is difficult to charge users extra. Therefore, Layer2 mainly relies on financing and issuing tokens for development and operations.
Comparing the issued tokens and Ether prices: OP is stronger than Ethereum and other Layer 2. The author believes that the main reason is that its narrative (OP+ZK and OP Stack) is more complete and has more capital support, which makes the market appreciate it. With higher expectations, it is estimated that its subsequent upside space will be broader. As the countdown to the Dencun upgrade enters, both OP and leading projects with native issued coins are receiving great attention from the market.
2.4 Latest TPS data comparison
Due to the popularity of the inscription market on the chain, the real-time TPS of various Layer 2 projects have also hit new highs. The maximum TPS of zkSync Era has risen to 62, and Arbitrum ranks second at 58. However, Base and OP have not benefited from this inscription market, and their TPS has not New adobe data. However, the current order of magnitude of TPS is still unable to withstand the simultaneous interaction of billions of users in the future. Layer 3 may be the solution that must be faced in the future.
2.5 Comparative analysis of head projects
From the active address:
In the past three months, the total number of active addresses of zksync Era has remained relatively stable, with the average number of active addresses per day at around 200,000. After the issuance of coins such as Arbitrum and OP, Arbitrum has maintained at around 150,000 per day, and OP has maintained at around 150,000 per day. About 60,000 per day. We see that Arbitrum’s ecological stickiness is significantly higher than OP, but the market’s pricing for ARB is lower than OP. The main reasons are:
1. OP Stack is supported by a large amount of capital and developers;
2. OP, as Layer 2 officially supported by Ethereum, will turn to OP+ZK hybrid proof in the future;
Judging from transaction volume and TVL:
Arbitrum data is far ahead, zkSync ranks second, and StarkNet has seen a significant increase in the number of new users this month due to the official confirmation of airdrop snapshots. The author speculates that ZK series zkSync and StarkNet may announce airdrop details at the end of this year or Q1 next year. According to historical experience, the rollup during the airdrop period and the TVL of projects in the ecosystem will have a large short-term increase. This will have a significant increase in the native projects that have issued tokens in the ecosystem, and the currency price will have a high probability of rising.
4. Layer 2 track ecological research
Among the top 10 market shares, Optimism and Arbitrum of the Op Rollups series account for more than 80% of the market share. Compared with the Zk Rollups series, they are slightly insufficient. However, as an important component of the Layer 2 ecosystem and a high-profile potential solution, Zk Rollups and Op Rollups are among the top 10. Each develops and learns from each other in the competition. Below, we combine the current market performance, select Arbitrum, Optimism, Base, zkSync, StarkNet and Linea as targets and explain them in detail:
4.1 Arbitrum Ecosystem
As a Layer 2 scaling solution, Arbitrum uses Optimistic’s Rollups to increase throughput and reduce gas fees. It does this by bundling multiple transactions into a batch and then submitting them to the Ethereum mainnet. Arbitrum is compatible with Ethereum smart contracts, meaning it can be used with existing dApps and DeFi protocols.
For now, Arbitrum's ecological quality is higher than other Layer 2, and it has more native ecology. Since Arbitrum has led and experienced the boom in the Layer 2 market, the native projects within the Arbitrum ecosystem are more well-known than other projects (such as Radiant Capital, GMX, Camelot, Treasure DAO). Judging from the number of daily active users, Arbitrum is the Layer 2 with the highest user stickiness after removing airdrop expectations. Next, we will discuss the development status of the native ecology of each Layer2, especially Layer2 that has not issued coins:
GMX
The Arbitrum ecosystem includes GMX, Radiant Capital, and Camelot in the DEFI category, but Arbitrum's DeFi ecosystem is more ecologically unique. Many DeFi projects are built based on the GMX liquidity pool.
Recently, the overall trading volume of GMX has rebounded with the overall rise in the market, and the currency price has also shown a positive correlation with it. With the OKX wallet adding 50x leverage trading through GMX integration, the author predicts that if the market continues to rise further, it may lead to an increase in the transaction volume on the GMX chain, thereby promoting the organic rise of the GMX token.
Treasure Dao
Treasure Dao is a non-DeFi project within the Arbitrum ecosystem. It is a lightweight casual game that favors creativity and playability.
Since 3A games mainly focus on industrial production capabilities and have high financial requirements, the author believes that in the competition with traditional Web2 games, lightweight creative games are likely to be the key to breaking the game. It can quickly iterate to find the best economic model and also bring instant fun to users, instead of heavy upgrades and gold grinding, which are often unsustainable.
4.2 Optimism Ecology
Optimism is also a Layer 2 scaling solution that uses optimistic rollups technology to increase throughput and reduce gas fees. It is also the first to allow a large number of users to obtain the security guarantees of Ethereum from the process of bridging funds from L1 without paying high gas fees. It is designed to be compatible with Ethereum smart contracts and supports the Ethereum Virtual Machine (EVM). Optimism also offers a feature called “Fraud Proof” that allows users to challenge invalid transactions.
Due to the weak innovation capabilities of the OP ecosystem, compared with Arbitrum, the OP ecosystem is slightly weaker, and the market has not embraced native projects within the OP ecosystem on a large scale. However, it has made considerable progress in infrastructure construction, such as the modular code base OP Stack and OP+ZK hybrid proof, etc., both of which have strong support and promotion from capital. At present, the native projects that have issued tokens in the OP are mainly Velodrome, and the others are mostly non-native projects, and the performance of ecological construction is average.
4.3 Base Ecology
Base is a Layer 2 network built by Coinbase, a crypto giant with a market capitalization of US$20 billion. It mainly uses Optimistic Rollup developed on the Ethereum network using OP Stack technology. Its network node providers mainly include Blockdaemon, QuickNode and Blast, Safe Wallet, block explorers Etherscan and Blockscout, and data indexers The Graph and Covalent, etc. Base has many native projects, including Aerodrome developed by Velodrome, Seamless Protocol, friend.tech, etc., which have become Base's leading projects.
Seamless
Currently, Seamless has issued tokens, and users can bet on token expectations such as Aerodrome and Friend.tech. Seamless does not have unique innovative features, but because its token is listed on Coinbase, it has attracted attention to native projects within the ecosystem.
Friend.tech
Frien.tech obtains the opportunity to communicate directly with KOLs by buying and selling KOL tokens. Facts have proved that this mechanism is still unsustainable.
Fren Pet
Fren Pet is a pixel-level game that develops pets through various token economics. At present, it seems that Fren Pet, as a Web3 game, also focuses more on token economics and ignores the fun of the game itself. .
4.4 zkSync Ecosystem
zkSync is a Layer 2 extension solution that uses zero-knowledge proofs to increase throughput and reduce Gas Fees. It is designed to be compatible with Ethereum smart contracts and supports the Ethereum Virtual Machine (EVM). zkSync also provides a feature called "zkPorter" that allows users to aggregate transactions and further reduce gas fees.
Unlike other ecosystems where DEX has formed a strong Matthew effect, competition among DEX on zkSync is particularly fierce. There is currently no eye-catching Lending business, so many developers and VCs are betting on the zkSync ecosystem.
Dmail Network
Dmail Network is a mailbox-related application on zkSync, which once won the first prize in the ETH Hackathon. At present, Dmail Network UAW is mainly due to the increase in the number of interactions expected to be brought about by airdrops.
We are here
Tevaera is a game platform similar to Treasure Dao on Arbitrum, but its games are of poorer quality and are still in the development stage and require continued attention.
4.5 StarkNet Ecosystem
StarkNet is a Layer2 scaling solution that uses zk-rollups to increase throughput and reduce gas fees. It is designed to be compatible with Ethereum smart contracts and supports the Ethereum Virtual Machine (EVM). StarkNet also provides a feature called "validium" that allows users to perform more complex calculations off-chain.
Due to technical reasons, StarkNet's TPS is relatively limited and the Gas Fee is high, causing the entire ecological construction to lag behind. However, thanks to the development environment within StarkNet, many innovative projects are being incubated:
StarkWare was the first to propose using recursive technology to vertically expand the Ethereum main network and proposed Layer3;
decentralized sorter Madara;
Dynamically upgradeable NFT standard StarkSheet;
Ekubo is the first to fully propose the implementation plan of Uniswap V4 hooks (currently Ekubo is helping Uniswap improve the V4 version);
Full-chain games, full-chain game engines;
It is precisely because of the lack of user interaction experience that the entry threshold for speculative users has been greatly raised, making it an industry builder focusing on opportunity ecology and worthy of early exploration in an uninhabited wasteland.
4.6 Linea Ecology
Linea is a Layer2 scaling solution that uses zk-rollups to increase throughput and reduce gas fees. It does not use a transpiler or custom compiler to generate ZK proofs for Solidity smart contracts, but uses compiled Solidity bytecode. Not only does it reduce the apparent risk of vulnerabilities and hacking attacks, but the innovative prover design they provide ensures faster transaction speeds and lower gas costs.
Linea and Metamask both belong to Consensys and have extremely large traffic entrances. Due to its use of ZK technology, the user experience is poor and it is temporarily lagging behind the similar Base launched at the same time (Base chose OP).
The overall innovation capability of the Linea ecosystem is insufficient. The only native project is the Lending protocol Mendi Finance, and the construction of non-DeFi projects has been lagging far behind other Layer 2 projects.
5. Summary
The Layer2 war is still going on, and all Rollups are also exploring many decentralization and expansion solutions during operation, including decentralized sequencer networks, modularity such as ZK Stack and OP Stack, Layer3, and OP+ZK hybrid proof technology , account abstraction, etc.
From the current point of view, the expansion plan of the EVM ecosystem will eventually move from the main network to Layer 2, OP to ZK, and Layer 2 to Layer 3. However, the Layer 2 track is still in a very early stage. Each Rollup has its own way of surviving in a highly competitive market: Arbitrum’s rich and unique DeFi ecosystem, StarkNet’s strong innovation and innovative projects, Optimism’s capital support, zkSync’s strategic vision, Base’s strong innovation and resources, etc.
As the Dencun upgrade approaches, the EVM era centered on Layer 2 is about to begin. It is a potential market with excellent opportunities for investors and an excellent opportunity for developers to attract the next billion users.
