Fun

News Feed - 2023-11-03 10:11:00

Zain Jaffer11 hours agoMonolithic vs. modular blockchainsEthereum founder Vitalik Buterin stated something called the Blockchain Trilemma. A blockchain tries to be secure, fast and decentralized.448 Total viewsListen to article 0:00Innovation CircleJoin us on social networksLooking at all the cryptocurrency in tracking sites like Coinmarketcap.com may leave most beginners confused at the number of tokens being offered to the public. Layer-1, layer-2, metaverse, DeFi, gaming, liquid staking, real world assets, memes and the like are like the toys in a large toy shop. Each has its own separate world.


One of the more recent types of tokens that have hit the market are called layer-2 scaling solutions. Examples of these tokens are Optimism, Arbitrum, zkSync, Polygon zkEVM, Consensys Linea, Coinbase Base, Starkware and a few that are not yet well known. 


Ethereum founder Vitalik Buterin stated something called the Blockchain Trilemma. A blockchain tries to be secure, fast and decentralized. But according to Buterin, it is very hard to achieve all three. Ethereum, for example, is secure and decentralized, but it is quite slow. Transactions can sometimes take an hour or so to finalize if the network is congested. It is secure and decentralized because more than 500,000 independent validator nodes now secure the network and approve transactions by consensus. That is also why it is slow compared to a blockchain that only has a handful of nodes that validate transactions by consensus.


The early blockchains like Ethereum, Solana, Cardano, Binance Smart Chain and others basically tried to do all the work of a blockchain by themselves. This is somewhat similar to a restaurant manager who is also the one taking orders, cooking the food, chopping the vegetables, manning the cash register, pouring the drinks and cleaning the tables and floors. The next customer would need to wait until the one-man crew is ready to take their order. Hence, a long line forms outside the restaurant.


The new layer-2 scaling solutions basically take some of the blockchain functions and only do the final settlement on the Ethereum chain. To the user, they may not notice and might be surprised that Ethereum is still behind the scenes as the one that records the final transaction. But the front end portion of the transactions are handled by the layer-2 chains.


Some time ago Ethereum underwent an upgrade called Shapella. This upgrade allowed the people who staked their ETH for validator nodes to withdraw these. Another upgrade that was done previously was to shift from Proof of Work (like Bitcoin) to Proof of Stake.


The problem is that Ethereum transactions are still slow and the gas (transaction) fees are still expensive. This is actually what the layer-2 scaling solutions want to address. For example, someone who wants to buy an NFT might not want to pay $50 for transaction fees on a $200 NFT. On the other hand, the buyer might be more amenable if the transaction fee was only $5, but the transaction is done on a layer-2 scaling solution that in turn finalizes on Ethereum. 


Conversely, if you are transacting something worth a million dollars, having the security of Ethereum might be worth a $20 gas fee just for your own peace of mind.


The way the layer-2 solutions work is sort of like dealing with the waiter and server at a restaurant, on the ordering, serving and payment. But you don’t actually see the chef who cooked your food. That’s how a layer-2 scaling solution works. It is still working on top of Ethereum, but you just see the scaling solution fee and speed.


One problem that comes up when you have many Ethereum layer-2 tokens is that when you are using one distributed application (dApp), you need one kind of layer-2; then for another dApp, you need another layer-2. That’s somewhat similar to having non-interchangeable poker chips from one casino to another. Although, right now you can bridge in between these different assets, but everytime you do so, you pay gas fees. 


Whether this strategy of performing most functions on layer-2 over Ethereum will dominate other layer-1 monolithic, “do everything” blockchains is still anyone’s guess. But the upcoming wave of layer-2 tokens looks like they will try to do just that.


Zain Jaffer is the CEO of Zain Ventures focused on investments in Web3 and real estate.


This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.

News Feed

Bitcoin Alert: Here’s Why The Trump Inauguration Is A ‘Buy The News’ Event
Este artículo también está disponible en español. Bitcoin has fallen to a low of $92,508 on January 8 after previously hitting $102,357 on Monday, marking almost a 10% re
Bitcoin metric repeats bull move that saw up to 1,900% BTC price gains
William Suberg8 hours agoBitcoin metric repeats bull move that saw up to 1,900% BTC price gainsBTC price action delivering $180,000 this cycle just became more of a reality, according to the Bitcoin Williams%R Oscillator
US Tennis Player Serena Williams’ VC Firm Leads Ugandan Fintech’s $12.3 Million Pre-Series A Funding Round
US Tennis Player Serena Williams" VC Firm Leads Ugandan Fintech"s $12.3 Million Pre-Series A Funding Round The Uganda-based digital lending fintech startup, Numida, has said it wil
‘Bitcoin will reach $1M, no doubt’ — Animoca founder at WebSummit Rio
Cassio Gusson2 hours ago‘Bitcoin will reach $1M, no doubt’ — Animoca founder at WebSummit RioYat Siu spoke on the panel "Bitcoin"s Revenge: Is Web3 Making a Comeback?" at WebSummit Rio in Brazil.1525 Tota
SEC Charges BitClout founder Nader Al-Naji with fraud
Vince Quill3 hours agoSEC Charges BitClout founder Nader Al-Naji with fraudThe Securities and Exchange Commission claimed the BitClout founder spent $7 million on personal luxury goods and gifts to family members.1004 To
Italian Luxury Fashion House Dolce & Gabbana Sells NFT Collection for $5.7 Million
Italian Luxury Fashion House Dolce & Gabbana Sells NFT Collection for $5.7 Million On September 30, the Italian luxury fashion house Dolce & Gabbana sold an NFT collection for $5.7
Down From the Peaks: A Look at How Far Crypto Assets Have Slid From Their All-Time Highs
Down From the Peaks: A Look at How Far Crypto Assets Have Slid From Their All-Time Highs Digital currencies had a phenomenal year, and a great deal of the crypto assets in existenc
Saudi Arabia and OPEC Reveal Surprise Oil Production Cut; White House Insists Cuts Aren’t Advisable Right Now
Saudi Arabia and OPEC Reveal Surprise Oil Production Cut; White House Insists Cuts Aren"t Advisable Right Now On Sunday, Saudi Arabia and several major oil producers announced thei
William Suberg2 hours agoBTC price metric warns that Bitcoin speculators may sell past $33KBitcoin speculators remain important for BTC price analysis as their profitability nears classic selling levels.1520 Total views1
HSBC, SGX to Investigate if DLT Offers Efficiency Boost for Bond Markets
Can digitalizing bonds with distributed ledger technology (DLT) bring benefits to market participants? That’s a question being asked by HSBC Singapore in a new trial being de
Bitcoin Academy in Brooklyn Backed by Jay-Z and Jack Dorsey Airdrops BTC to Class Participants
Bitcoin Academy in Brooklyn Backed by Jay-Z and Jack Dorsey Airdrops BTC to Class Participants Rap star Jay-Z, otherwise known as Shawn Carter, and Block CEO Jack Dorsey, recently
How long will Bitcoin’s price consolidation last?
Nancy Lubale5 hours agoHow long will Bitcoin’s price consolidation last?Bitcoin price drops to new lows, but analysts expect BTC"s consolidation to end within a month.9032 Total views31 Total sharesListen to article 0: