Ethereum is the leading blockchain for developing decentralized applications (dApps), hosting various DeFi platforms, games, and other Web3 projects. However, due to increasing users and the growing adoption of Web3, Ethereum is riddled with scalability issues, leading to higher transaction costs and slower processing times.
To address these issues, Layer 2 solutions were introduced. They are independent blockchains that enhance Ethereum’s capabilities by increasing its processing capacity and reducing transaction fees. However, out of hundreds of projects, some have stood out, offering innovative solutions that resonate with users and developers alike. Here are the top 12 Layer-2 projects on Ethereum.
What is a Layer 2 Solution?As stated earlier, Layer 2 solutions are designed to improve Ethereum’s scalability and security by moving transactions off the main Ethereum network for processing and recording them on the blockchain when they have been settled.
These solutions excel at handling a larger volume of transactions, as they can process thousands of transactions compared to Ethereum’s capacity of 15 transactions per second in the same timeframe, significantly improving efficiency. Additionally, Layer 2 solutions can combine multiple off-chain operations into one on-chain transaction, providing a more cost-effective option accessible to a wider range of users.
Top 12 Layer 2 Solutions on EthereumWhile Layer 2 projects have made a name for themselves when it comes to blockchain use and innovation, there are a few projects that stand out. Here are the top 12 Layer 2 Solutions on Ethereum:
ZKsyncSource: zksync.io
ZKsync is a Layer 2 scaling solution created to alleviate congestion and high fees on the Ethereum network. It uses zero-knowledge proofs to process transactions off-chain in batches, resulting in faster speeds and lower costs (one cent per transaction).
ZKsync’s scalability goes beyond transaction speed. By providing a robust platform for developers to build upon, it aims to create a thriving ecosystem of decentralized applications (dApps).
Founded in 2019 by Matter Labs, ZKsync released its version 1 in June 2020 and has since become a leading solution, processing over 400 million transactions, creating 7 million addresses, and having a total value locked (TVL) of $876 million.
ZKsync also provides innovative features like ZKsync Era, which uses cryptographic validity proofs to provide low-cost transactions on Ethereum, and SDKs in various programming languages to help developers build dApps on ZKsync’s ecosystem.
StarkwareSource: starkware.co
Starkware is a solution that utilizes both zk-rollup and optimistic rollup approaches to build layer-2 blockchains for Ethereum. It leverages zk-STARKs (zero-knowledge scalable transparent arguments of knowledge) for security, which are transparent cryptographic proofs using lightweight hash functions to verify computational integrity without needing trust.
In essence, Starkware operates as a faster and more scalable proof system than others, relying on fewer and more secure cryptographic assumptions.
The project has achieved several significant milestones, processing over 750 million transactions, minting over 147 million NFTs, and facilitating a cumulative trading figure of $1.28 trillion with a TVL of $494 million.
Starkware offers two major products: Starknet and StarkEx. Starknet is a zk-rollup enabling developers to deploy dApps with unlimited scalability. On the other hand, StarkEx is a SaaS project that supports various use cases, including NFT minting and trading, derivative trading, automated market making (AMM), payments, and DeFi pooling.
Arbitrum (ARB)Source: arbitrum.io
Arbitrum is recognized as a highly effective layer-2 solution that enables low-cost transactions. It can group multiple transactions through optimistic roll-up technology before submitting them to Ethereum’s mainnet, thereby reducing gas fees and maintaining cost efficiency.
This solution is fully compatible with Ethereum smart contracts and decentralized applications (dApps) while maintaining high speed and efficiency. Its ecosystem includes Arbitrum One and Arbitrum Nova, two separate platforms utilizing the Arbitrum Nitro Stack to increase their throughput. Additionally, it has one of the highest Total Value Locked (TVL) among layer-2 solutions, with over $2.97 billion in total value locked.
Polygon (MATIC)Source: polygon.technology
Polygon is known as one of the most versatile Layer 2 projects on Ethereum because of its wide range of scalable technologies. One of these technologies is Polygon PoS, which processes transactions on a separate chain to make them faster and cheaper. Additionally, Polygon runs zkEVM, an open-source ZK rollup compatible with the Ethereum Virtual Machine. Polygon ID provides native blockchain identity solutions, while AggLayer offers trustless cross-chain interoperability.
In its latest update, Polygon 2.0 introduced a new token, POL, enabling users to stake and contribute to network governance across multiple blockchains. This update aims to improve liquidity and scalability using zero-knowledge technology. Polygon has a market cap of $5.2 billion and a circulating supply of 9,894,059,780 tokens, making it a popular choice for developers looking for scalable and versatile solutions.
Optimism (OP)Source: optimism.io
Known as the best equivalent to the Ethereum Virtual Machine (EVM), Optimism facilitates interoperability with Ethereum’s smart contracts and dApps without requiring code modifications. This makes it ideal for developers looking to deploy their protocols on Ethereum.
Optimism achieves scalability by leveraging Optimistic Rollups to reduce transaction costs and improve overall throughput. Furthermore, its robust ecosystem supports various projects, reflecting its versatility.
BaseSource: base.org
Base was launched in 2023 to tackle Ethereum’s scalability issues by offering a high-performance framework for rapid transaction processing. The project operates at significantly reduced costs of less than a cent since Ethereum’s Dencun upgrade. Its robust architecture, built on the latest advancements in blockchain technology, ensures seamless interoperability with Ethereum’s mainnet.
Base leverages the power of Coinbase exchange to create a user-friendly platform that has quickly become a favorite among developers and users. The platform integrates both optimistic rollups and zk-rollups and harnesses them to offer an optimal balance between security, scalability, and speed. This hybrid approach, coupled with its user-friendliness, has helped propel Base’s ascent to the forefront of the crypto industry, as evidenced by its high TVL (Total Value Locked) of $1.43 billion.
MantleSource: bridge.mantle.xyz
Mantle’s platform uses a distinct data availability solution jointly powered by EigenDA and optimistic rollup technology. These distinct features are instrumental in providing faster transaction processing speeds at cheaper rates. Launched in July 2023, Mantle has quickly garnered attention within the developer community. During its extensive testnet phase, it processed over 14 million transactions and launched over 80 dApps with over 48,000 developers involved.
Mantle uses a modular architecture that distributes tasks like execution, settlement, consensus, and data availability across network nodes. The data availability layer also integrates with EigenLayer’s Ethereum protocol to support ETH staking and facilitate high transaction throughput reaching up to one terabyte per second or more.
Mantle’s developer-first approach is reflected in its substantial TVL value of up to $458.77 million. The project has hosted over 20 hackathons and received 400 project submissions during its testnet phase. Mantle also offers a Grants program and a $200 million Mantle Ecosystem Fund to support developers with resources and incentives to build high-quality dApps. Notably, Mantle has reduced gas fees by over 80%, boasting a performance capability of up to 500 transactions per second, significantly outpacing Ethereum.
MetisDAO (METIS)Source: metis.io
MetisDAO has gained significant attention in the Layer 2 community due to its innovative use of Optimistic Rollups for scalability and its strong focus on simplicity and user-friendliness. This approach has made MetisDAO an attractive platform for both developers and users.
Additionally, MetisDAO is the first Optimistic Rollup to achieve sequencer decentralization. With traditional Layer 2 projects, one entity known as a sequencer was responsible for grouping transactions together and sending them out for processing and settlement. As such sequencer decentralization enables MetisDAO to spread that responsibility among multiple sequencers, making transaction processing even faster.
MetisDAO’s governance structure is heavily dependent on active participation. The native token, METIS, serves as a utility token for governance, transaction payments, and staking. The platform has forged partnerships and integrations with various DeFi, NFT, and enterprise applications, creating a diverse ecosystem catering to different users.
It also provides access to dApps on the platform. Token holders can vote on proposals, allowing them to directly shape the future of the MetisDAO network.
Since its launch, the MetisDAO ecosystem has been bustling with activity. The platform has processed over 17 million transactions, with over 878,000 wallets connected.
Blast (BLAST)Source: blast.io
Blast is recognized as one of Ethereum’s most innovative scaling solutions, primarily due to its unique yield generation mechanism. The project has an auto-rebasing feature that helps stabilize the value of tokens like ETH and USDB. This simplifies yield accrual, making it easier for developers and users to earn rewards without worrying about token value fluctuations.
What distinguishes Blast from other yield generation projects is its ability to offer native yield on ETH and stablecoins like USDC, USDT, and DAI while directly integrating Ethereum’s staking and treasury bill protocols. This means users can earn passive income without manually stake their tokens.
Blast also leverages optimistic rollups to ensure EVM compatibility, allowing dApps to be deployed seamlessly without requiring modifications.
Another popular Blast feature is its gas revenue-sharing model, which redistributes net gas fees to dApp developers. This innovative approach has contributed to its rapid growth, with the project amassing over $1.3 billion in TVL, indicating its strong potential and growth trajectory.
EclipseSource:eclipse.xyz
Eclipse is widely known as one of the fastest Layer 2 projects on Ethereum, leveraging the Solana Virtual Machine (SVM) for execution. Solana is the fastest blockchain currently, so Eclipse’s integration allows it to process transactions much faster than the Ethereum Virtual Machine (EVM), resulting in an exceptional throughput of over 100,000 transactions per second. This high-speed processing volume makes Eclipse an effective solution for dApps that require rapid transaction times and can handle high volumes of transactions with minimal latency.
Eclipse settles its transactions on Ethereum to ensure robust security, using Ethereum’s validating bridge to confirm transaction validity and order. The project has also integrated with Celestia for data availability, offering scalable bandwidth that significantly surpasses Ethereum’s current capacity.
Additionally, Eclipse incorporates unique features like using RISC Zero for efficient zero-knowledge fraud proofs and a register-based design that simplifies transaction proving. Notably, Eclipse has chosen not to create its own native token, instead choosing to use ETH for gas fees. This decision further simplifies integration with Ethereum’s DeFi and NFT ecosystems, making it easier for users and developers to adopt and utilize the platform.
dYdX (DYDX)Source: dydx.exchange
dYdX is the leading Layer 2 solution for decentralized perpetual trading. It uses an innovative combination of off-chain order handling and on-chain state changes. This hybrid approach greatly enhances throughput and reduces gas fees, making dYdX ideal for high-frequency traders and market makers who need to update their orders frequently.
dYdX also supports margin trading with up to 20x leverage, catering to professional traders looking for advanced trading tools. The project employs zk-rollups to boost scalability while relying on Ethereum’s security for transaction verification.
As a non-custodial project, dYdX ensures users retain full control over their assets. This means that users are responsible for managing their own funds and can only connect their wallets to dYdX. Even if the project gets hacked, users’ funds remain safe since they are not stored directly on dYdX itself.
Notable features of dYdX include its decentralized governance model, powered by the DYDX token, which allows community members to vote on protocol upgrades and other critical issues. Furthermore, the transition to the dYdX v4 platform on the Cosmos SDK aims to enhance the project’s performance and scalability further, solidifying its position as a top choice for decentralized trading.
Loopring (LRC)Source: medium
Loopring is a versatile, blockchain-agnostic (compatible with multiple blockchains) protocol that creates decentralized exchanges (DEXs). It also uses order rings, which match multiple orders in a circular fashion to optimize liquidity and efficiency.
At the core of Loopring’s technology are zero-knowledge rollups, which batch numerous transactions off-chain and generate cryptographic proofs verified on the Ethereum mainnet. This ensures Ethereum-level security, which will, in turn, reduce gas fees, and boost overall transaction throughput. Additionally, the native token, LRC, plays a crucial role in the ecosystem, as it is used for staking, governance, and sharing in protocol fees, fostering network security and community engagement.
ConclusionLayer 2 solutions continue transforming the Ethereum ecosystem by focusing on scalability and user experience. Each of the top 12 Layer 2 solutions brings its own unique strengths, whether through improved transaction speeds, reduced gas fees, or innovative mechanisms like rollups and sidechains. As Ethereum continues to grow, Layer 2 technologies are expected to play an important role in supporting more decentralized applications and services, which will, in turn, foster the adoption of blockchain technology as a whole.