An Overview of Ethereum’s Layer 2 Ecosystem

Quick take

  • With the rise in popularity of DeFi applications, the Ethereum network has become increasingly congested, with common transactions costing up to $100 in gas.
  • Early attempts at scaling on layer 2 struggled to gain traction, largely due to limited security and usability of previous implementations.
  • Rollups can inherit security and usability almost completely from layer 1, and may be poised for significant adoption in 2021.
Demand for Ethereum blockspace is currently at an all-time high, with common transactions like executing a trade on Uniswap frequently costing over $100 in gas. Efforts to scale Ethereum have been the subject of active research and development for years, and while layer 1 scaling may still be years away, layer 2 scaling may be approaching a major inflection point.

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