Overview of Popular Layer 2 in 2023: From Base with a TVL of $300 million to Polygon zkEVM with a 33% increase in 7 days
With the market warming up, is there an opportunity for ordinary users in the Layer 2 track? Let's take a look at these representative projects.In exploring a new chapter of blockchain technology, Layer 2 technology is particularly important. It is a second-layer protocol built on top of public blockchains (Layer 1), aimed at expanding the transaction capacity and application scenarios of blockchain. Currently, most Layer 2 solutions are built on the Ethereum network, which is especially noteworthy.
The core of Layer 2 lies in constructing a secondary protocol network outside the main chain, allowing most transactions and execution tasks to be completed on Layer 2. Then, through various mechanisms, these results are periodically submitted in batches to Layer 1 for verification. The advantage of this approach is that it not only greatly enhances the transaction speed of the blockchain but also reduces transaction costs. More importantly, Layer 2 inherits the advantages of public chains, such as decentralization, security, and privacy protection.
According to data from L2beat, the total value locked (TVL) in Layer 2 has surpassed $13 billion, currently reaching $13.6 billion. This figure not only showcases the rapid development of Layer 2 technology but also reflects the market's high recognition and trust in this emerging technology. As Layer 2 technology continues to mature and be applied, we can foresee that it will play an increasingly important role in the blockchain field.
TVL trend chart of Layer 2 projects in the past six months
Next, we will delve into the world of Layer 2 and conduct a detailed review of several notable new projects. Through these analyses, we can not only better understand the potential of Layer 2 technology but also gain insights into the trends of future blockchain technology development.
Why is Layer 2 Crucial? It Can Address Multiple Shortcomings of Layer 1 and Strengthen the Technical Foundation for the Industry
In the journey of exploring blockchain technology, Layer 1 public chains, such as Ethereum, have laid the foundation for decentralization and censorship resistance, but their limitations in transaction speed and cost have become a significant bottleneck. Especially during the rapidly developing bull markets in areas like DeFi, GameFi, and NFTs, network congestion and high Gas fees have become major obstacles for users.
The charm of blockchain lies in its provision of a more economical and faster transaction method. However, when transaction costs soar to hundreds of dollars, the advantages of blockchain over traditional payment methods like Visa or PayPal diminish significantly. Users originally hoped to avoid the high fees of traditional payments through blockchain but are faced with even more expensive blockchain transaction costs, creating a contradiction that makes it difficult for blockchain to attract a broader Web2 user base.
In this context, the importance of Layer 2 technology becomes increasingly prominent. Layer 2 effectively improves transaction processing speed and reduces Gas fees by adding a new layer of technical architecture on top of Layer 1. This innovation not only addresses the scalability issues of Layer 1 but also allows ordinary users to easily access dApps and DeFi services, experiencing truly fast and economical blockchain transactions.
The advantages that Layer 2 brings to public chain networks include:
Enhanced transaction processing capacity: Since the transaction speed of Layer 1 is limited by block generation time, it struggles to meet the demands of large-scale commercial applications. Layer 2 achieves high efficiency in transaction processing by increasing transactions per second (TPS).
Reduced usage costs: Layer 2 operations can significantly reduce the high Gas fees of Layer 1, making blockchain applications more feasible for a broader user base.
Expanded application scope: Layer 2 introduces more innovative features, such as enhanced privacy protection and cross-chain interaction, further broadening the application scenarios of blockchain.
Optimized user experience: Layer 2's transaction processing is closer to the experience of traditional Web2 applications, making it easy for non-technical users to get started.
Enhanced security of Layer 1: By transferring a large number of transaction processes to Layer 2, the pressure on Layer 1 can be effectively alleviated, thereby improving the overall security of the system.
In summary, Layer 2 is not only key to the advancement of blockchain technology but also an important driving force for its widespread application. With the continuous development and popularization of Layer 2 technology, we can expect blockchain technology to have a more profound impact on various industries in the future.
Having understood the importance of Layer 2, we will now turn to some notable new Layer 2 projects to explore how they leverage these advantages and their specific applications and impacts in the blockchain field.
A Look at the Popular Superstar Projects in the Layer 2 Space in 2023: From Base to Polygon zkEVM
With the continuous advancement of Layer 2 technology, 2023 has witnessed the rise of several notable projects. Projects like Base, zkSync, and Mantle have not only achieved significant breakthroughs in technology but also realized substantial growth in market share.
Top ten Layer 2 projects
Base, zkSync, and Mantle are the star projects of this year, collectively occupying 11% of the market share of the top 10 Layer 2 solutions in October. All three projects were launched this year, debuting in March and July, and quickly secured a place in the market.
Base: Coinbase's Layer 2 Revolutionary Public Chain
Launched by Coinbase, Base is an Ethereum Layer 2 network based on the Optimism OP Stack. It is known for its high-speed, secure, and low-cost transaction environment. Base leverages Coinbase's deep background in the cryptocurrency field to provide a new DeFi ecosystem for Ethereum developers and Coinbase's user base.
Data table of Base public chain
As of October 2023, Base's total value locked (TVL) reached $300 million, accounting for 7.2% of the market share of the top 10 Layer 2 solutions. The rapid rise of Base is attributed to Coinbase's strong support and the popularity of SocialFi applications like friend.tech.
zkSync: A Technical Solution Perfectly Combining Privacy and Efficiency
zkSync, a zk-Rollup project developed by Matter Labs, focuses on providing efficient, low-cost, and confidential transaction solutions for Ethereum. Since the launch of zkSync Era in March, it has become the seventh-largest Layer 2 solution in the market, with an October TVL of $120 million, accounting for 2.8% of the market share. The popularity of zkSync is partly due to its attraction of users seeking airdrop rewards, who bridge funds to the network in hopes of gaining additional benefits.
Mantle: An Innovative Layer 2 Network Launched by BitDAO
Mantle Network is a Layer 2 network launched by the leading decentralized autonomous organization BitDAO. It employs Optimistic Rollups technology to provide a faster and more economical transaction experience than Ethereum. Mantle's TVL exceeded $48 million in October, with a market share of 1.1%. The merger of BitDAO and Mantle Network has brought significant financial support to Mantle, allowing it to secure a place in the cryptocurrency field.
Polygon zkEVM: Dual Advantages of EVM and zkRollup
Polygon zkEVM is a zk-Rollup solution launched by Polygon, combining EVM compatibility with the advantages of zkRollup. As of November 11, its total locked amount reached $100 million, with a 7-day increase of 32.42%, ranking 10th among Layer 2 solutions.
Gnosis: A Permissionless Decentralized Exchange and Major Holder of sDAI
Gnosis Protocol is a permissionless decentralized exchange that significantly enhances liquidity through a ring trading mechanism. Gnosis's TVL reached $160.1 million in October, with a market share of 3.7%, growing 2.47 times compared to the beginning of the year. This growth is attributed to Gnosis Chain's support for the interest-bearing stablecoin sDAI from MakerDAO. Gnosis Chain, as one of the major holders of sDAI, is becoming a key player in asset tokenization.
These Layer 2 projects not only showcase technological innovation but also pave new paths for the future development of blockchain technology. As these projects mature and develop, they are expected to play a greater role in promoting the popularization and application of blockchain technology.
The Technological Innovations and Breakthroughs of Layer 2 Are Worth Noting, and Higher Quality Projects May Enter This Space in the Future
As we have delved into the new stars of the Layer 2 field in 2023, a clear trend emerges: Layer 2 technology is not only maturing but also shaping the future of cryptocurrency and blockchain technology. From the rapid growth of Base to the privacy protection of zkSync, and the innovative applications of Mantle and Polygon zkEVM, these projects demonstrate the diversity and potential of Layer 2 technology.
These advancements are significant not only for technology enthusiasts and developers but also provide ordinary users with more choices and better experiences. With improved transaction speeds and reduced costs, Layer 2 solutions are breaking the boundaries of traditional financial services, bringing more convenient and economical digital asset trading methods to the public.
Looking ahead, we can expect Layer 2 technology to continue driving innovation and popularization in blockchain. With the emergence of more projects and applications, Layer 2 will not only be a branch of technology but will become a key force in advancing the entire digital currency field. In this new Layer 2 era, we will witness more innovations, broader application scenarios, and more far-reaching impacts.
