Top 5 Layer 2 Coins are the Future of Crypto
Technology | Value | Use | Behind | Ecosystem
CHANGE is the rule of the world. In everyone’s life, there comes a moment when old things or old activities must be changed and new things must be accepted.
The world of technology is running on the principle of this change. In crypto, technology is advancing rapidly; Formerly, there was Layer 1, DeFi, and CEX; Now there is Layer 2, Zkrollup, and DEX.
Focus
Although investors look only at the price of tokens and coins on the cryptocurrency market; clever ones focus on the technology behind those crypto projects. The more advanced the technology, the more uses it will have. The value of a token or coin varies based on the use case.
People will like to put funds where money can be generated, as happened with the Pepe token.
Future
No one can deny that cryptocurrency is a unique technology. With the passage of time, this technology advances to a more advanced level. We should invest in cryptocurrencies based on the advanced potential of crypto’s future technologies.
Now the direction of crypto is shifting from Layer 1 to Layer 2. The old layer 1 has been performing amazingly and will continue to do so because layer 1 is the foundation of layer 2, just like there are floors in a building.
Return
The old Layer 1 coins have shown wonders by giving high returns, now it is the turn of the new Layer 2. Money flow will shift from Layer 1 to Layer 2 and new investors will also prefer Layer 2 over Layer 1. Today, we will discuss Layer 2 projects based on the many possibilities of Layer 2.
We will also try to understand how the Layer 2 project has grown recently and what sort of work is being done.
Let’s Begin…
In crypto, layer 2 is the key piece. Can these layer 2 project coins give us good profit in the future?
Layer 2
Ethereum is a layer 1 blockchain network. When we make a transaction on the Ethereum network, it passes through many steps before it is added to the block.
First of all, the transaction is sent out, then picked up by a random validator, then approved by the rest of the validators by checking whether it is correct or not, and then executed and settled as soon as there is a consensus agreement. When it is added to the transaction block, a copy of it is made available to all validators.
4 Stages Issues
Here, the procedure is divided into four stages: consensus, transaction execution, transaction settlement, and data availability. The Ethereum layer is responsible for all of this.
If Ethereum continues to use this sort of four-part process mechanism, the Ethereum network will be unable to scale. Due to weak scalability, mass production will not be possible.
To solve the problem of scalability, it was decided to create an execution layer. This is how Layer 2 (L2) was born.
Sidechain came before layer 2. Polygon started working on the plasma chain.
Concept
The concept of layer 2 is designed in such a way that the security of the execution layer is derived from layer 1 and it processes the transaction on its side and settles it in the Ethereum network. Generally, transactions are done on Layer 2 and a batch of transactions are sent to Layer 1. In this way, all transactions are settled in Layer 1.
Batching is handled by the sequencer. The sequencer’s responsibility is to process the transaction and submit it to layer 1 for settlement. The sequencer is managed by some entities and these entities get some percentage of the fee generated in the network.
The sequencer in Arbitrum and Optimism is approximately 20. Layer 2 has between 10 and 20 sequencers. Because there are so few sequencers, it is still a part of centralization.
Top 5 Layer 2 Projects
Arbitrum is the first name that comes up in Layer 2. Optimism is ranked second, ZkSync is ranked third, Matic is ranked fourth, and Starknet is ranked fifth.
Arbitrum’s highest TVL is $2.5 billion. Even after the Arbitrum airdrop, TVL has risen. Their ecosystem is growing rapidly in which many good innovations have happened. Chronos is now performing well, and DeFi’s innovation has been the finest in this regard. GMX has also done well.
- The daily TPS of Arbitrum is 11.45 and the last 30 days’ transaction count is around 27 million.
- It has a swap fee of $0.2 and has 338 protocols listed on it.
Ecosystem
In the future, Layer 3 from Orbit will be included in the ecosystem by Arbitrum. You may utilize the Arbitrum tag from the SDK to launch an application-specific rollup. The future plan of Arbitrum and Optimism is to sell Tag.
If someone wants to use their tag, then first the proposal has to be passed in Arbitrum’s DAO. To participate in this proposal, an ARB token will be required and voting will be necessary. Their 3 main developments are Arbitrum Orbit, Arbitrum Nova, and Arbitrum One.
Optimism has Optimistic rollups. Its TVL is around 900 million and TPS is around 3.79. Around 7.25 million transactions have occurred in the last 30 days. The swapping fee is $0.23 and 138 protocols are listed on it.
Development
The use of their Superchain’s SDK has started. Coinbase is working with Optimism to build the Base Chain. Many games have begun to be developed on the Base Chain. Worldcoin has also partnered with optimism.
Upgrade
The bedrock update of optimism is on its way. The Testnet of the bedrock upgrade has been operating for a long time, and it will soon be available on Mainnet.
Don’t make the mistake of thinking of optimism as less important than Arbitrum.
Zksync’s token has not yet been released, but everyone is waiting for its airdrop.
Zkrollup is owned by Zksync, and its TVL is roughly 130 million. The majority of the TVL that is now visible was solely deposited by Airdrop hunters.
- The daily TPS is around 8.83, and the last 30-day transaction amount is around 12 million.
- swapping fee is around $0.15 and In the Zksync ecosystem, there are 43 protocols.
Its token is going to come very soon. Because of the buzz around the Zksync token, the listing gain will almost certainly be beneficial, and I expect it to perform well even after listing.
The Project of Vitalik’s Mother
Vitalik’s mother is a co-founder of the Metis Layer2 project. Metis uses Hybrid Tag, as well as optimism rollup and zero-knowledge proof.
The TVL of the Metis is around 37 million and the Daily TPS is 0.29. Because they are using the Memo data availability layer, the swapping fees are relatively low.
The transaction charge is quite low in this case due to the hybrid model and DAL.
The total transaction in the last 30 days is 375k, which is really low. Its Metis token has been listed for quite some time. There are 38 protocols inside Metis.
The ecosystem of the Metis project has not grown much, due to which it could not attract everyone’s attention. Let’s see how it goes from here.
Starknet is built on the Zkrollup model. Its TVL is only around 11 million. Its airdrop has yet to come, which is why TVL is so low in airdrop hunting. Its daily TPS is around 2.
- The total number of transactions in the previous 30 days is 4 million.
- This swapping fee is $0.23. Statknet has more than 80 protocols listed.
StarkEx
Prior to Zksync, there was more activity on Statknet. Starkware’s StarkEx tag was used by many protocols to build their own Rollups. Dydx and ImmutableX have done a Rollup build using StarkEx.
Starknet’s general-purpose rollup has not got that much attraction. Starknet was unable to expand rapidly due to poor user experience.
So, My Friends, These were our Top 5 Layer 2 Projects…
- Arbitrum and Optimism are the most developed of these five.
- Zksync will take a long time to grow up.
- Due to the high use of optimistic rollups tag in the short term, layer 2 can perform well.
- Zkrollup will achieve enormous success in the long run.
Race
Right now, the primary focus should be on Arbitrum and optimism. In the future, the project with the most Layer 3 releases will win the Layer 2 race. How to win the race? Layer 3 will come on top of Layer 2 and Dapps will come on top of Layer 3. The race will be won by whoever makes the most solid ground.
The Mentle project is coming which has the ability to compete with all these Layer 2 projects.
♦ I hope you all understand what the Layer 2 project is all about. Which project do you like most? Let us know in the comments.
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Disclaimer
This is not Financial Advice. This article is meant only for educational purposes. I am just sharing my thoughts and analysis based on my many years of experience.