Does a Layer 2 Scaling Solution solve all the challenges companies face on the public blockchain?
At the end of 2019, research firm Forrester and Big Four firm Ernst & Young, or EY, Release A report investigating the adoption of public blockchain by companies. The survey results show that 75% of respondents are likely to use public blockchain in the future.
This was true, but the report also found that most businesses still use private blockchain to ensure security, privacy, and scalability. The top three concerns about public blockchain networks were the lack of maturity, security, and privacy issues.
Fast forward to 2021 — These concerns remain. Meanwhile, advanced solutions are being implemented to address these issues for companies looking at public blockchain networks.
For example, one of the most important developments to enable the use of public blockchain is known as the Layer 2 scaling solution. Layer 2 networks are not a new concept, but many Layer 2 scaling solutions are currently being developed to meet the requirements of the enterprise.
Tas Dienes, an ecosystem supporter of the Ethereum Foundation and chair of the Enterprise Ethereum Alliance Main Networking Group, said Layer 2 scaling solutions primarily address transaction throughput limits for distributed blockchains on Layer 1 networks. I told Cointelegraph that I was aiming for it.
“Instead of running all transactions directly on the blockchain, you can run them on a Layer 2 instance that can significantly reduce the number of transactions per second and significantly reduce the number of transactions per second, but it is important. The good news is that Layer 2 is protected by Layer 1, so you can continue to get many of the same security guarantees provided by the underlying blockchain. “
Layer 2 scaling solution for enterprise needs
According to Dienes, the most obvious advantage of Layer 2 solutions is that applications running on the network are not affected by the throughput limits of the underlying blockchain. This is very important. The Ethereum blockchain network has long been criticized This is because the number of transactions per second is very small.
The solution was further commented by Anna Frankowska, Chief Commercial Officer of Aventus Network, Ethereum’s Layer 2 blockchain protocol, telling Cointelegraph that Ethereum’s current throughput of 15 transactions per second is not sufficient. It was. From a perspective, she said, “The Visa network alone handles about 17,000 transactions per second.”
Dienes uses a Layer 2 solution to “high throughput, low transaction costs, strong public chain security, and interoperability with other applications built on it,” so enterprises have the best of both worlds. I explained that it has. He said. This is a step up from the previous use of private blockchain networks by enterprises with a semi-centralized chain that can handle more transactions per second than a fully decentralized public chain.
Dienes further said that Layer 2 solutions could also help companies address other issues facing the public blockchain. Privacy, for example, is one of the biggest concerns organizations face when it comes to leveraging public blockchain networks. In fact, 50% of respondents surveyed in the EY and Forrester 2019 report cited privacy as their primary concern.
Dienes says that specific Layer 2 technologies have been developed to address this specifically, allowing businesses to deploy private Layer 2 instances that keep sensitive information away from the Layer 1 network. This improves privacy and retains some of the interoperability and security benefits of Layer 1 networks. He further commented that combining this with zero-knowledge proofs would be even more powerful for companies using Layer 2 solutions in public networks like Ethereum. Become a popular platform for business use cases..
When it comes to security, Layer 2 solutions can address enterprise challenges such as data locality. This is another major concern for companies considering public blockchain. For example, Dienes commented that companies that store data in specific locations for compliance purposes can use Layer 2 servers to run that data in known locations by known entities.
Discover different layer 2 solutions
While Layer 2 solutions can solve many of the challenges companies face when it comes to adopting public blockchain, Frankowska says that Layer 2 solutions make it easy for organizations to use private blockchain on public networks. Also states that it will be useful.
“They can start with an authorized Layer 2 chain with natively implemented business logic and gradually open it to the public. Most companies put their toes on Layer 2 before jumping in completely. I want to soak it in water. “
This is important because many companies still rely on private blockchain today and may hesitate to switch to an open network.It’s also important to understand that the company still exists Many layer 2 scaling solutions Implemented and developed. As a result, there is no “universal” solution to meet the needs of the enterprise.
Despite hesitation, hybrid layer 2 solutions are also emerging. “New developments are taking place almost every week in this rapidly evolving field,” said Dienes, who can combine some of the best characteristics of different technologies.
He further explained that the Layer 2 category that has been gaining attention in many organizations these days is “rollups.” According to Dienes, rollup “rolls up” a batch of transactions on a Layer 2 network and writes transaction description data to Layer 1.
“By calculating transactions in L2 and using L1 only to store transaction descriptions and ensuring that the calculations were done correctly, we can increase the total throughput of the system by several orders of magnitude.”
Vitalik Buterin, author of the Ethereum white paper, recently said: Rollup is coming to the Ethereum ecosystem soonPlease note that this can increase Ethereum’s transaction throughput by a factor of 100.
Different types of rollups are being developed for different instances, Dienes said. This is where zk-Rollups and Optimistic Rollups use different mechanisms to enforce transaction accuracy, allowing different trade-offs such as transaction latency and withdrawal delays.
In addition, there are some Layer 2 scaling solutions that use Layer 1 for security, but store transaction data off-chain or not. “Varidium, plasma, and state channels are the main channels. We don’t write too much data to L1, so we can offer much higher throughput than rollup at the expense of decentralization,” Dienes said. Stated.
The challenge of navigating the vast Layer 2 ecosystem
It’s worth noting that so many Layer 2 developments have taken place, but the vast ecosystem can be difficult for businesses to navigate.
Dienes explained that the main challenge for new entrants is the large number of different Layer 2 technologies, each with its own strengths and weaknesses. As a result, companies that create Layer 2 will need to tailor Layer 2 to the needs of each applicant in order to maintain a level of security and success.
For example, Dienes said off-chain data scaling solutions such as Validium, Plasma, and State channels could be very suitable for certain types of enterprise applications that can trust known entities to store this data. I did. “Solutions in this category have the potential to provide greater privacy compared to rollups, increased isolation from resource requirements of other applications (such as CryptoKitties), control of data storage, etc. It has characteristics for other companies, “he says.
While Dienes recommendations may help, understanding the features that a Layer 2 solution can provide for a particular use case is not yet easy for many organizations.Fortunately, as the space matures, this can become easier over time, as more solutions may ultimately be emphasized to the requirements of the enterprise.
But, as Frankowska pointed out, this may not be as easy as it sounds. There are always security concerns, volatility issues, regulatory uncertainties, and skepticism about what appears to be a panacea. “That’s why not all Layer 2 solutions are created the same. In addition to scaling, you also have to address price stability, interoperability, and security issues. One missing The pillars and temples have collapsed, “she commented.
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Layer 2 scaling solution solves enterprise public blockchain challenges
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