Solana will also usher in Layer 2. Is it just Ethereum L2 in a new bottle?
Written by Alex Liu, Foresight News
The Solana community has always been the main force in criticizing the flaws of the Layer 2 solution. But now some Solana ecosystem projects are also building L2. Some people jokingly say that this puts Solana supporters in a dilemma - should they continue to criticize or flexibly adjust their views? Is Solana going to become what it once hated?
I think before making a judgment, we should first understand whether Solana's Layer2 is just a new bottle of old wine in Ethereum's L2, and what is the difference between the two.
What do they think?
Regarding Solana’s Layer2, Solana co-founder Toly said: “L1 can’t prevent anyone from building L2 on Solana. As an engineer, if there are any technical issues, I will fully support them. Although the L2 execution environment is competitive with L1. The main difference between ETH and Solana is that ordinary tx bytes on Solana L1 are already as cheap as blobs. Solana’s fees are driven by hotpots, and L2 can’t help with this. Therefore, the fees charged to users by Solana L2 and Solana L1 will be roughly the same.”
Kyle, a major investor in Solana and partner of Multicoin, directly expressed his pessimism about Solana L2: "I think people will build L2 on Solana, which is permissionless. Go ahead, no one will stop you. But I don't think they will achieve meaningful adoption. I may be wrong, let's wait and see!"
User fees are not much different from L1, and I don’t think it will gain meaningful adoption... Is Solana’s Layer 2 a useless alternative to Ethereum? Let’s take a look at what these projects actually built.
Zeta Markets
Zeta Markets is developing a Layer 2 solution called ZX. ZX is an optimistic rollup based on Solana that aims to improve the speed and scalability of decentralized trading by enabling trustless on-chain settlement using zero-knowledge proofs (zk-proofs).
Features of ZX
High throughput: ZX is capable of processing 10,000 transactions per second (TPS), significantly improving transaction performance.
Low latency: Transaction confirmation time is less than 10 milliseconds, close to the performance of centralized exchanges.
Seamless trading experience: Provide one-click trading function to simplify user operations.
High leverage options: Supports 50x leverage and provides a variety of collateral options.
Zero-knowledge proof: Use zk-proofs to achieve trustless on-chain settlement, ensuring the transparency and security of transactions.
$Z Token: ZX’s native token $Z will serve as the gas fee for transactions and incentivize participants.
ZX architecture diagram
Why build L2 on Solana to achieve the above functions?
According to Zeta Markets’ litepaper, the reasons for building Solana Layer 2 mainly include the following:
Improve transaction performance: Although Solana's Layer 1 already has high throughput and low latency, in order to further improve the performance of decentralized transactions, ZX uses optimistic Rollup and zero-knowledge proof (zk-proofs) technology. These technologies can achieve performance close to that of centralized exchanges while maintaining decentralization and security (such as a transaction throughput of 10,000 TPS, while the actual TPS on Solana L1 is 1000-2000).
Solving congestion issues: Solana may experience network congestion during periods of high transaction volume. By moving some transaction processing to Layer 2, ZX can reduce the burden on Layer 1, thereby improving the efficiency and stability of the overall network.
Lower transaction fees: Although Solana’s transaction fees are already relatively low, through the Layer 2 solution, ZX can further reduce user transaction costs, especially in high-frequency trading and large-scale trading scenarios.
Enhanced User Experience: ZX aims to provide a seamless trading experience, including one-click trading and transaction confirmation times below 10 milliseconds. On Solana L1, the block interval is 400 milliseconds. These improvements will bring the user experience closer to centralized exchanges while retaining the advantages of decentralized exchanges such as self-custody and transparency.
Ecosystem Integration: Solana’s DeFi ecosystem is growing rapidly, and the introduction of ZX will further enhance the liquidity and interoperability of this ecosystem. ZX plans to leverage Solana’s low transaction fees and fast block times to accelerate the finalization of Rollup blocks, thereby improving user experience.
In summary, Zeta builds Solana's Layer 2 solution ZX, which aims to improve the performance of decentralized transactions, reduce transaction fees, enhance user experience, and solve network congestion problems. These improvements are necessary to meet the growing demand for DeFi and enhance the overall competitiveness of the Solana ecosystem.
marginfi
Marginfi is the second largest lending protocol in terms of TVL on Solana. Is its newly launched liquidity layer the L2 that everyone knows?
Not really! Despite the word “layer” in its name, marginfi’s liquidity layer is not a regular L2, but an integrated “liquidity layer” protocol designed to provide liquidity support for DeFi applications on Solana.
Features of the liquidity layer
Integrated Liquidity Layer: Marginfi serves as Solana’s first liquidity layer, allowing traders to access liquidity without cross-chain bridging.
Risk Management System: MarginFi’s risk management system manages risks for the marginfi liquidity layer, and each bank can define its own risk parameters.
Multi-asset support: Users can borrow and lend 16 assets simultaneously, providing greater flexibility in liquidity management.
High yield: Through native staking and native token earnings, users can obtain integrated local returns.
Decentralized application support: Provides the necessary infrastructure for decentralized applications such as transactions, indexing, and payments.
As a liquidity layer that focuses on providing liquidity support and risk management for DeFi applications on Solana, the liquidity layer is not a Layer 2 solution in the conventional sense - it does not have its own execution environment, does not require a sequencer, full nodes, etc. But this unconventional L2 with Solana characteristics may be a more valuable Layer for the L1 network.
Which one would you choose: a layer that allows access to liquidity without cross-chain bridging, or Ethereum L2 with fragmented liquidity?
Different from the core of Ethereum L2
Due to various differences in architecture and design, Solana L2 and Ethereum L2 have the following significant differences:
Transaction Fee Fluctuations:
Although transaction fees on Ethereum L2 have been significantly reduced, there are still fluctuations, especially during times of high network load. In contrast, Solana’s L2 solution continues to maintain low transaction fees, typically below $0.01, and fees are stable and do not fluctuate significantly due to changes in network load.
Transaction speed:
Although the transaction speed of Ethereum L2 has improved, it is still not as good as Solana’s native network. Solana’s transaction confirmation time is very short, usually around 400 milliseconds, while Ethereum L2’s transaction confirmation time can be between 5-10 seconds. Solana’s L2 solutions like ZX are capable of processing 10,000 transactions per second (TPS) with transaction confirmation times of less than 10 milliseconds, significantly increasing transaction speeds.
Interaction complexity
Solutions such as MarginFi’s liquidity layer are seamlessly integrated with the native network, allowing access to liquidity without cross-chain bridging, simplifying the user experience.
Summarize
In fact, Solana's L2 solution was designed with common criticisms of Ethereum L2 in mind, providing a good user experience, low transaction fees, extremely high security, and fast transaction speeds. Compared to Solana L1, it can also supplement functions and meet more needs. Let us wait and see with Kyle how Solana L2 will develop in the future.
