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Ethereum’s second layers improve scalability to the detriment of decentralization

Key facts:
  • Ethereum should be left as a layer to settle transactions, specialists say.

  • It would be advisable to improve the coordination between the second layers of Ethereum.

In a panel at the Blockchain Summit Latam 2021 conference, which takes place between September 6 and 10, the issue of second layers in Ethereum was addressed, used to increase the scalability of that network. With the moderation of Cristóbal Pereira, CEO of LatAmTech Finance, Cristóbal García, content leader at Buenbit, and Mateo Daza, from Giveth’s Token Engineering area, participated in the panel.

Cristóbal Pereira said, in the panel’s introduction, that the fact that Ethereum has established itself as the most used network in smart contracts, decentralized finance applications (DeFi) and non-fungible tokens (NFT), it is due, in part, to the development of second layers on that network.

The growth of users and applications on Ethereum has been supported by these solutions, whose development has accelerated in recent months, said Pereira.

Cristóbal García, for his part, referred to the growing popularity of the rollups on Ethereum, one of the types of second-layer scalability solutions, among which he mentioned Arbitrum and Optimism. Arbitrum is a rollup launched on September 1, as reported by CriptoNoticias. A rollup allows you to “roll” hundreds or thousands of transactions into one to facilitate confirmation on Ethereum, Garcia said.

Regarding another rollup of his preference, Garcia says he likes Optimism’s approach, because it maintains the same level of security as Ethereum and offers very good scalability. This second layer approach takes the execution of smart contracts off the main grid, so Ethereum is used only as a settlement layerGarcia noted. “These rollups They make us wonder if Ethereum really needs to execute the contracts. He argues that this work can be left to scalability solutions.

Mateo Daza, for his part, pointed out that the scalability solution he prefers is the sidechain xDai, and who has developed numerous projects in Giveth, with it.

From the point of view of the future potential of scalability solutions, Daza refers to the integration of the Polygon sidechain and the Hermez zkRollup as very promising. The zkRollups are rollups that are based on the zero knowledge test (Zero Knowledge Proof), as explained by CriptoNoticias in an article about this proposal. Zero-knowledge tests are known as those that allow validating the veracity of information without revealing sensitive data about it.

Limitations of Ethereum Scalability Solutions

Pereira asked the panelists about the concerns present in the second layer development process and what important challenges there are. Daza referred to the fact that Vitalik Buterin, the co-founder of Ethereum, had spoken of a “trilemma” typical of any blockchain. No blockchain, according to Buterin, you can achieve excellent performance in security, scalability and decentralization simultaneously.

This also applies to second layer and side chain solutions. “It is then necessary to establish a commitment and give ground in one of the three areas to achieve a good performance in the other two”, says Daza. Theoretically, with the transition to Ethereum 2.0, these limitations could be solved, says the specialist.

Also, there is an additional concern, according to Daza, and it is the lack of coordination and interoperability between the different scalability solutions.

García highlights that second-layer solutions are at a very early stage and that many of them have an important limitation: although they significantly improve scalability and considerably lower commissions, they tend to be very centralized.

Above, Cristóbal Pereira, moderator, and from left to right Mateo Daza and Cristóbal García. Source: BSL2021.

While it is expected that [las soluciones de escalabilidad] evolve towards less centralized proposals, there is no certainty that this evolution will occur.

Cristóbal García, content leader at Buenbit.

Ronin and xDai: tailored solutions for Ethereum users

Towards the end of the talk, Cristóbal García addressed Ronin’s description, a sidechain conceived for the game Axie Infinity. “Ronin is a product conceived for the profile of its users, the gamers,” says Garcia. It was introduced last February and by the beginning of August it had already managed to exceed one million daily active users, as reported by CriptoNoticias.

Ronin uses a concept similar to that of the Ethereum Virtual Machine (EVM), but it is very centralized, says García, and is focused on the gameplay and other aspects of the successful game.

On an Axie Infinity website it can be seen that Ronin blockchain validators are appointed by the Sky Mavis company, that is, by the game developers themselves.

On the other hand, xDai is a sidechain, which also has an EVM version very similar to Ethereum, says Mateo Daza, although its biggest disadvantage is that it has only 11 validator nodes. Even if the nodes are in the hands of companies with recognized experience in the development of Ethereum, says Daza, the concept of decentralization is lost.

In addition to the scalability advantages it offers, Daza highlights one of its peculiarities: the token with which transactions are paid is a stable currency, since an xDAI is equal to a DAI, stable currency pegged to the US dollar.

Looking to the future, both panelists coincide in pointing out that there is currently misinformation about the role of second layer solutions and the future evolution of Ethereum on its way to full implementation of version 2.0.

For example, there are doubts about the role of scalability solutions in the transition to sharding or fragmentation of the network into multiple segments called «shards‘, Each with its own independent status.

The panellists agreed that, given the current role of second layer and side chain solutions, it is not clear how these will be integrated into the different segments of the network.

Tammy Sewell is our Writer and Social at OICanadian.com. Tammy loves sports, she writes our celebrities news. She spends time browsing through several celebs news sources as well the Instagram. Email: Tammy@oicanadian.com Phone: +1 513-209-1700

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