Ethereum DeFi ecosystem spreads conversion to Layer 2 due to the burden of fees and speed

[Digital Today Reporter Chigyu Hwang] Among decentralized finance (DeFi) projects developed based on the Ethereum public blockchain, examples of changing the platform to a layer 2 based environment are coming out one after another due to the burden of fees and scalability.

In recent years, dYdX, an Ethereum-based decentralized exchange (DEX), has joined the process of moving from the Ethereum mainnet to a layer 2 scalability enhancement solution.

In the blockchain field, Layer 2 focuses on solving the scalability problem of the blockchain main network, which takes time to process transactions due to the distributed nodes. It is structured to perform transactions in a separate environment rather than the mainnet, and verify only the results on the mainnet.

In the case of public blockchains such as Bitcoin and Ethereum, when the demand for transactions is insufficient, a load is generated on the network, and transaction fees are inevitably increased accordingly. In particular, Ethereum has faced a situation in which fees have increased as the ecosystem of the DeFi project developed based on Ethereum has grown. As the fee, called gas cost, is excessively charged, scenes with a belly button larger than the belly are also being produced.

This is the practical reason why DeFi projects are thinking about Layer 2. According to Defiant’s media, dYdX, which is ranked 7th in the world, has cooperated with Starkware, a ZK-Rollup-based layer 2 technology developer, for the past 7 months. ) To the Layer 2 basis.

The layer 2 based dYdX project was unveiled on the 24th (local time). It is initially offered in a limited form to some users, and will be open to all within a few weeks once stability is fully tested.

This move of dYdX is noteworthy as it can be seen as a sign that Ethereum scalability enhancement solutions are mature enough to be used by large DeFi projects. dYdX reviewed various Layer 2 solutions to solve the scalability problem. Although we considered using other public blockchain platforms other than Ethereum, we concluded that Starkware will be able to provide the best user experience in the fastest possible time.

“Other Layer 1 platforms don’t yet have the building blocks such as wallets and development tools that have made Ethereum a success. Other Layer 2 solutions, such as optimistic rollups, are potentially promising, but ZK-Rollup. It doesn’t offer the same cryptographic guarantees and levels of decentralization,” he explained.

Prior to dYdX, Synthetics, an Ethereum-based synthetic asset platform, also moved SNX token staking to a layer 2 environment based on an optimistic rollup, and Graph is cooperating with State Channel. Loopring, a DEX service developed based on ZK-Rollup, also appeared.