Categories: Ethereum

Layer 2 solutions grow 20% after the ETH price hits the new ATH

According to the tracking service L2Beat, Ethereum’s Layer 2 solutions are once again showing strong growth overall. After Ethereum fees hit new highs and the network became impractical for using decentralized applications and solutions, users are looking for Layer 2 networks with low fees and faster transaction speeds.

Over the past seven days, the total value of the Ethereum Layer 2 solution has increased 20%, reaching $ 4.39 billion. Projects such as Arbitrum, Loopring and Optimism saw growth of 20, 84 and 98%, respectively. Both Arbitrum and Optimism use optimistic rollup technology.

Optimistic rollup

This type of Layer 2 solution enables the use of smart contracts that are executed on the main level of Ethereum. While smart contracts run on the main layer, they are also backed up by the mainnet.

When users are ready to opt for a Layer 2 solution, their coins will be stored in smart contracts on Ethereum. The user sends an off-chain provisioning transaction to an aggregator, which then generates a new smart contract, calculates a new root, and finally generates an Ethereum transaction.

Other solutions like Loopring use a technology called ZK Rollups which works differently and seems to be a more complex technology than Optimism. It uses math and complex calculations to conduct transactions on zero-knowledge evidence.

The evolution of technology

The main reason for the rapid growth and development of Layer 2 solutions is the rising fees on the Ethereum network. The Ethereum mainnet fees were consistently above 100 Gwei all week and a transaction costs around 15 US dollars.

Source: L2Beat

With distributed applications generating thousands of TPS at times, gas charges can become a serious problem for users. Because of this, Layer 2 solutions are getting more attention from investors who are unwilling to spend hundreds of dollars just to make one or a few trades.

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