Since its inception, Ethereum has emerged as one of the main platforms in blockchain, currently sitting behind Bitcoin as the second largest blockchain by marketcap. It’s known and used for its smart contract capabilities and security. On Ethereum, developers can create decentralized applications (dApps) that go beyond just currency transactions, allowing the creation of decentralized finance (DeFi), NFTs, and more.

However, with the surge in popularity and usage, Ethereum faces a significant hurdle, scalability. Imagine a highway busy with traffic; Ethereum is somewhat that, struggling with high transaction fees and slower processing times as more and more users hop on the bandwagon.

‍

This is where Layer 2 solutions come into play, serving as vital side roads to this congested highway.

Layer 2 solutions are like bypasses or extensions built on top of the main Ethereum blockchain (Layer 1). They tackle the scalability issue by handling transactions off the main chain, only interacting with it when absolutely necessary. This approach reduces the load on Ethereum, leading to faster transactions and lower fees. It's a bit like creating express lanes in our highway analogy, where certain types of traffic (transactions) can move quickly, easing the congestion.

The need for these solutions has become more pressing as the Ethereum ecosystem continues to grow. Layer 2s don't just offer a band-aid fix; they're crucial for the long-term scalability, efficiency, and sustainability of Ethereum, ensuring it remains a viable platform for the growing demands of blockchain users and builders.

Currently, the Total Value Locked (TVL) in Layer 2s stands at an impressive 16 billion dollars, a figure expected to climb as more chains join and liquidity increases.

‍Types of Layer 2 Solutions: Optimistic Rollups VS Zero-Knowledge (zk) Rollups

There are more types of L2 scaling solutions, but currently the most popular in use are rollups. Rollups consolidate multiple transactions into a single one that gets recorded on the main Ethereum blockchain. There are two kinds of rollups: Optimistic Rollups, which use economic incentives and game theory for validating transactions, and Zero-Knowledge (zk) Rollups, which employ cryptographic proofs for security and privacy.

Optimistic Rollups

• Function: Process transactions off the main Ethereum chain, assuming they are valid by default. Fraudulent transactions can be challenged and removed.

• Advantages: Increases scalability and reduces fees; compatible with Ethereum's smart contracts.

• Limitations: Transaction finalization can be delayed due to the fraud-proof period; slightly less secure than the main Ethereum chain.

Zero-Knowledge (zk) Rollups

• Function: Bundle many transactions into one and use cryptographic proofs to validate them without revealing individual details.

• Advantages: Offers enhanced privacy and faster processing; improves scalability by reducing the data on Ethereum's blockchain.

• Limitations: More complex technology, potentially limiting broader adoption; may not support all smart contract types.

Both these Layer 2 solutions are key to scaling Ethereum, with Optimistic Rollups focusing on compatibility and ease, and zk-Rollups emphasizing privacy and efficiency.

In this segment, we're diving into the top 11 Ethereum L2 projects, offering a comprehensive comparison that caters to developers, builders, investors and enthusiasts. We have selected these as the top 11 L2s based on a few factors: the total value locked (TVL), their revenue (transaction fees in the last 30 days), their unique value proposition and developer activity.

A significant chunk of the insights and details were gathered from a couple of standout sources that I can't recommend enough if you are looking to dive even deeper into the L2 rabbit hole. Do check out DefiLlama and L2beat for a more comprehensive understanding and enriched data about security, risk analysis, development stage, market share, activity and more.

L2Beat

DefiLLama

Arbitrum

Arbitrum is a technology suite designed to scale Ethereum. You can use Arbitrum chains to do all things you do on Ethereum — use Web3 apps, deploy smart contracts, etc., but your transactions will be cheaper and faster. The flagship product — Arbitrum Rollup — is an Optimistic rollup protocol that inherits Ethereum-level security.

Twitter: twitter.com/arbitrum

Dev Docs: docs.arbitrum.io

Token: ARB coinmarketcap/arbitrum

Optimism

OP Mainnet is a fast, stable, and scalable L2 blockchain built by Ethereum developers, for Ethereum developers. Built as a minimal extension to existing Ethereum software, OP Mainnet's EVM-equivalent architecture scales your Ethereum apps without surprises. If it works on Ethereum, it works on OP Mainnet at a fraction of the cost.

Twitter: twitter.com/optimismFND

Dev Docs: community.optimism.io

Token: OP coinmarketcap/optimism

Base

Base is built as an Ethereum L2, with the security, stability, and scalability you need to power your onchain apps. Confidently deploy any EVM codebase and onramp your users and assets from Ethereum L1, Coinbase, and other interoperable chains.

Twitter: twitter.com/BuildOnBase

Dev Docs: docs.base.org

Token: n/a

zkSync Era

zkSync is a Layer-2 protocol that scales Ethereum with cutting-edge ZK tech. Our mission is not only to merely increase Ethereum's throughput, but to fully preserve its foundational values – freedom, self-sovereignty, decentralization – at scale.

Twitter: twitter.com/zksync

Dev Docs: era.zksync.io/docs/dev

Token: n/a

dYdX v3

dYdX v3 aims to build a powerful and professional exchange for trading crypto assets where users can truly own their trades and, eventually, the exchange itself.

Twitter: twitter.com/dYdX

Dev Docs: docs.dydx.exchange

Token: DYDX coinmarketcap.com/dydx

Previously operating as a Layer-2 DEX for perpetual swaps, dYdX is transitioning to its own blockchain built with Cosmos SDK to handle more transactions. The new dYdX chain will allow trading fees to be shared with validators and stakers, a shift from the previous model where fees weren't shared with users.

The total supply of DYDX is 1 billion, spread over five years. The tokens are split up like this: 27.7% to investors, 14.5% for user rewards, 15.3% to employees and consultants, 5% for retroactive rewards, 5.2% for liquidity providers, 7% to future employees and consultants, 24.2% to a community fund, and small percentages to liquidity and safety pools.

There's a possible 2% inflation each year, decided by token holder votes. The dYdX Foundation can change these rules, like they did by extending the lock period for early investors' tokens.

Mantle

Mantle Network is a technology stack for scaling Ethereum, and strives to be EVM-compatible while doing so. Being EVM-compatible means all the contracts and tools that work on Ethereum also work on Mantle Network with minimal modifications. Users can experiment with exciting web3 apps, and developers can deploy smart contracts in an efficient, low-fee environment.

Twitter: twitter.com/0xMantle

Dev Docs: docs.mantle.xyz

Token: MNT coinmarketcap.com/mantle

Immutable X

ImmutableX is the leading platform for building web3 games on Ethereum.Powering the next generation of web3 games.

Twitter: twitter.com/ImmutabIeX

Dev Docs: docs.immutable.com/docs/x

Token: IMX coinmarketcap.com/immutablex

Linea

Linea is a network that scales the experience of Ethereum. Its out-of-the-box compatibility with the Ethereum Virtual Machine enables the deployment of already-existing applications, as well as the creation of new ones that would be too costly on Mainnet. It also enables the community to use those dapps, at a fraction of the cost, and at multiples the speed of Mainnet.

Twitter: twitter.com/LineaBuild

Dev Docs: docs.linea.build

Token: n/a

Linea has secured a massive $726 million in funding and has already opened up its mainnet to the public. They've promised to reward the early birds who tested the network, which suggests they might be gearing up to release their own token and potentially reward those early supporters with an airdrop. However, the nuts and bolts of Linea's tokenomics—the way the tokens will be distributed, used, controlled, and how many there will be—are still under wraps. For the latest and most reliable scoop on Linea's tokenomics, keep an eye on their official updates through their website or social media outlets.

Starknet

Starknet is a permissionless, decentralized zero-knowledge rollup (ZK rollup) for Ethereum. It operates as a Layer 2 (L2) blockchain, enabling any dApp to achieve unlimited scale for its computation without compromising on Ethereum’s composability and security.

Twitter: twitter.com/Starknet

Dev Docs: docs.starknet.io

Token: STRK coinmarketcap.com/starknet

Polygon

Polygon is a Layer-2 scaling solution created to help bring mass adoption to the Ethereum platform. It caters to the diverse needs of developers by providing tools to create scalable decentralized applications (dApps) that prioritize performance, user experience (UX), and security.

Twitter: twitter.com/0xPolygon

Dev Docs: wiki.polygon.technology

Token: MATIC coinmarketcap.com/polygon

Scroll

Scroll is a security-focused scaling solution for Ethereum, using innovations in scaling design and zero knowledge proofs to build a new layer on Ethereum. The Scroll network is more accessible, more responsive, and can support more users at once than Ethereum alone, and if you’ve ever used or developed an application on Ethereum, you’ll be right home on Scroll.

Twitter: twitter.com/Scroll_ZKP

Dev Docs: docs.scroll.io/en/home

Token: n/a

In March 2023, Scroll got a big boost of $80 million from big-name investors like Polychain, Sequoia, and BainCapital. After they launched their Mainnet on October 17th, they saw a lot of action with over 100,000 transactions in just the first week. This means more people are building using Scroll. They started testing things out with a pre-alpha testnet in August 2022 and then moved to a more advanced test in February 2023 on the Goerli network. Now, Scroll is worth $1.8 billion. But even with all this progress, they haven't shared the details about their scroll tokenomics. Everyone's looking forward to the Scroll airdrop, hoping it'll be worth the wait.

Conclusion

Wrapping up this post, we would like to draw attention to a perspective shared by Ethereum's co-founder, Vitalik Buterin, in one of his latest pieces regarding Layer 2 solutions. He observed a growing diversity among Layer 2 projects and anticipates this trend will persist.

“One of the inevitable consequences of this is that we are seeing a trend of layer 2 projects becoming more heterogeneous. I expect this trend to continue...”

Vitalik notes that some projects currently existing as independent layer 1s are looking to bring themselves closer to the Ethereum ecosystem and potentially become ecosystem layer 2s.

Prefer Your Stories in Motion?

For the movers and shakers who'd rather watch than read, here’s the video version of our blog post – all the insights, none of the scrolling!

About t3rn

t3rn has been created to offer a fresh approach to the problem of blockchain interoperability – the ability for blockchains to communicate and interact with one another. t3rn offers fast, secure and cost-efficient swapping, optimizing cross-chain executions by leveraging the modular layers of the t3rn stack for storage, validation, settlement and consensus.

t3rn is the modular interoperability layer, offering superior swapping for users and powerful modularity for builders.

Join Multichain Matters

Join our newsletter to receive high-quality content like this, alongside the latest web3 tech and t3rn updates, exclusively in your inbox once a month. Join alongside +15,000 subscribers - no spam, only value.