Gate.io Research: The Development Status and Prospect of Layer 2 Protocol

Please take a look at our newest research: “The Development Status and Prospect of Layer 2 Protocol”

This piece aims to address the issue of “THE” trilemma of security, decentralization, and scalability for blockchains, where one of the three is often compromised if one or two other elements are optimized.

https://www.gate.io/article/17440

Key Takeaways

- The barrier of the capacity expansion technology lies in the struggle to improve the scalability of blockchain while guaranteeing its security and decentralization at the same time. As mentioned before, all three affect each other and are compromised somewhere along the road.

- At present, state channels, sidechains, and Tenfold Protocol are scaling technologies of Layer2; however, there is still a long road ahead to obtain a sufficient balance between security, decentralization, and scalability

- Lightning Network and Plasma are both confronted with limitations while expanding their scalability

- Lightning Network’s development roadmap has focused on how to balance the relationship between the scalability and security of the BTC blockchain. With a main goal to achieve a rapid and easy payment channel

-Plasma requires advanced technology to accomplish the security of an off-chain trade in a non-regulated environment; however, there is a trade-off here too (withdrawal mechanism very complicated and dependent on many factors)

Conclusion of the research:

Scaling is a problem that all current blockchain eco-systems need to face and figure out. Many researchers have come up with different scaling solutions, but none of these can completely solve the problem because of the blockchain trilemma of security, decentralization and scalability.

Lightning Network and Plasma are based on common layer-2 scaling technologies, state channels, and sidechains, respectively. While Lightning Network works to scale bitcoin’s blockchain by taking frequent small transactions off-chain, the unsupervised Plasma chain, aiming to scale Ethereum, can ensure transaction security off-chain.

As the most liquid cryptocurrency, bitcoin is most likely to evolve into a daily payment method. However, its speed of processing transactions has restricted its development. Therefore, what Lightning Network does to make small transactions possible off-chain has eased the burden of limited blockchain size and made transactions easier for users.

Nevertheless, there is a possible risk that centralized channel nodes of Lightning Network will lead to a lower level of security.

Ethereum 2.0 has not been launched yet, and Plasma, as a blueprint of Ethereum’s scalability, which tries to ensure the security of transactions, is still in development. Although it has been updated a few times, there are still some technical issues to overcome. Nonetheless, as a “pioneer” in Ethereum scalability, Plasma has discovered and solved many problems of off-chain scaling through practice, which plays a significant role in the future development of Ethereum.

For those interested they can find the entire research here:

https://gatedoc.opencoding.com/RESEARCH/The-Development-Status-and-Prospect-of-Layer-2-Protocol.pdf

We are looking forward to presenting you with our newest piece real soon!

#LN #Plasma #bitcoin #ethereum #crypto