Is Layer 2 Scaling for Blockchains Living up to Its Promise?

As crypto-mania approached its peak in 2017, it seemed like every project was striving to build the latest, greatest blockchain platform, resulting in rafts of mainnet launches in 2018. The reality is that many of those projects have struggled to survive. They’re competing for a limited pool of developers and see little activity beyond a few underused dApps. 

However, after that, came another wave of developers who decided to do things a little differently. Rather than reinvent the wheel, their priority was improving on the current design. 

Layer 2 solutions take an existing blockchain and use it as the underlying infrastructure for applying new capabilities. They can leverage technological advancements in speed, scalability, and security made over recent years. At the same time, Layer 2 platforms have the advantage of being able to tap into the established user base of long-standing and popular blockchains without being a threat. 

Several layer 2 platforms have launched in the last year or two, so now is a good time to check in and assess whether they’re living up to their initial promise. 

Matic Network is a layer 2 solution for the Ethereum platform, enabling extremely high throughput of potentially millions of transactions per second. It uses an adapted version of the Plasma scaling protocol, together with PoS side chains. Transactions taking place on the Matic layer are pushed to the Ethereum main chain via PoS checkpoints.  

An alumnus of the Binance Launchpad platform, Matic showed significant early promise. It garnered investment from Coinbase Ventures shortly after completing an initial token offering in April 2019. 

Since then, the project has gone on to gain some serious traction in the blockchain space. It now has several dApps already operating on the platform, including gaming currency Pocket Full of Quarters and trading platform Koinfox. 

This layer 2 project has also continued to form partnerships and alliances with some of the better-known names in the blockchain space. Matic counts Decentraland founder Esteban Ordano among its advisers and has joined forces with other Ethereum layer 2 projects, such as Celer network. 

Earlier this year, reports emerged that dApps had started to migrate away from Loom in favor of Matic Network. 

LiquidApps started out in 2019, offering its Dapp Network as a second layer layer for the EOS blockchain. It launched with a single service: vRAM. This aims to overcome the issue that EOS RAM is both limited in supply, and developers have to bear significant peaks in RAM costs during times of high demand. 

Since its launch, LiquidApps has been rapidly expanding its range of services and scaling up the Dapp Network. Following vRAM, the company has expanded into other services for developers, including oracles, scheduled tasks, and inter-blockchain communication. 

In late 2019, the company launched vCPU, offering horizontal scaling capabilities across blockchains. More recently, LiquidApps cemented its commitment to enabling blockchain interoperability with the launch of LiquidX, making the Dapp Network available across every EOSIO chain, and non-EOSIO chains, too. 

Along with new services, LiquidApps has also been working to increase its network of Dapp Service Providers (DSPs.) These companies can choose to offer any package of the LiquidApps services to developers, for which they receive payment in Dapp tokens. There are now nearly 30 DSPs on the Dapp Network. 

RSK takes a slightly different approach to the Layer 2 concept, operating as a side chain of the Bitcoin blockchain. Whereas Satoshi Nakamoto designed Bitcoin to be a pure payment system, RSK brings the same smart contract capabilities Ethereum to the Bitcoin ecosystem. However, with a capacity of 400 transactions per second, RSK significantly outperforms Ethereum’s current speeds. 

RIF, which stands for RSK Infrastructure Framework, is a layer developed on top of RSK that provides various decentralized services to developers. These include RIF Payments, RIF Directory, and RIF Storage. 

In 2019, IOV Labs acquired the Latin American social media network Taringa!, providing the company with access to a ready-made user base of 30 million people. Most recently, the company has announced an enterprise collaboration with the Central Bank of Argentina on a proof-of-concept for a blockchain-based clearing system. 

Lightning Network was one of the earlier layer 2 platforms and was hotly anticipated by those in the Bitcoin community who were frustrated with slow processing times. The network uses state channels, which allow two parties to connect and instantly transact in Bitcoin via a multi-signature wallet. Once they agree to close the channel, the transaction data is updated onto the main Bitcoin blockchain, significantly reducing overall network traffic. 

It’s fair to say that Lightning Network has received plenty of criticism over recent months. In February, a team of researchers published a paper alleging that the network was veering towards centralization. Furthermore, uptake doesn’t appear to correlate with the high level of initial excitement about the project. 

However, none of that is to say that Lightning Network should be written off. The platform has gained support from the likes of Twitter founder Jack Dorsey, and recently, Asian online ticketing agency Future.Travel announced it was accepting BTC via the Lightning Network. So there are still plenty of reasons to assume that the project is here to stay. 

It’s true that a few notable examples of new blockchains such as EOS and Tron have managed to create significant traction since their launch in 2018. However, it’s fair to say that, in several cases here, layer 2 platforms are gaining traction faster than many of the lesser-used platforms languishing far down the ranking tables. 

Nevertheless, the blockchain space remains highly competitive, and all projects need to ensure they keep focusing on ongoing development if they’re to remain ahead of the curve.