Blockchain

Most Layer 2 solutions are still struggling with scalability

Published

4 hours ago

December 23, 2024

Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.

Since pivoting to a layer 2-centric approach, the Ethereum (ETH) ecosystem has relied heavily on L2 solutions to scale. However, these solutions are struggling to compete effectively, especially under pressure from alternatives like Solana (SOL). During the recent meme coin craze, Solana attracted much of the activity due to its advantages: low fees, high transaction speed, and user-friendliness.

To understand the challenges, it’s essential to examine why L2 solutions have not demonstrated the scalability and cost advantages that were widely anticipated.

Why meme projects favor Solana over Ethereum L2s

Meme projects have significantly contributed to the recent surge in market activity. These projects favor Solana for several reasons beyond user-friendliness:

Low fees: Solana’s low transaction costs make it ideal for fee-sensitive applications like memecoins.
High speed: Solana’s multithreaded architecture enables high throughput, ensuring seamless user experiences.
Better developer experience: Solana’s tools and ecosystem are optimized for ease of use, attracting developers and projects.

Why is scalability important?

Scalability is fundamentally measured by the number of transactions a blockchain can process. A highly scalable blockchain can handle more TXs while offering lower fees, making it crucial for widespread adoption and maintaining a seamless user experience.

This is especially important for grassroots projects like meme coins, many of which are short-lived and highly fee-sensitive. Without scalability, these projects cannot thrive, and users will migrate to platforms that offer better efficiency and cost-effectiveness.

Why Ethereum L2s aren’t up to the challenge

Architectural limitations of Ethereum. Ethereum has long faced scalability issues, and L2 rollups are its primary solution to these problems. L2s operate as independent blockchains that process transactions off-chain while posting transaction results and proofs back to Ethereum’s mainnet. They inherit Ethereum’s security, making them a promising scaling approach.

However, Ethereum’s original design poses inherent challenges. Ethereum’s founder, Vitalik Buterin, has admitted that “Ethereum was never designed for scalability.” One of the key limitations is the lack of multithreading in the Ethereum Virtual Machine. The EVM, which processes transactions, is strictly single-threaded, meaning it can handle only one transaction at a time. In contrast, Solana’s multithreaded architecture allows it to process multiple transactions simultaneously, significantly increasing throughput.

L2s inheriting Ethereum’s limitations. Virtually all L2 solutions inherit Ethereum’s single-threaded EVM design, which results in low efficiency. For instance, Arbitrum: With a targeted gas limit of 7 million per second and each coin transfer costing 21,000 gas, Arbitrum can handle about 333 simple transactions per second. More complex smart contract calls consume even more gas, significantly reducing capacity. Optimism: With a gas limit of 5 million per block and a block time of 2 seconds, Optimism can handle only about 119 simple transfers per second. Gas-intensive operations further reduce this capacity.

Unstable fees. Another major issue with Ethereum and its L2 solutions is unstable fees during periods of high network activity. For applications relying on low and stable fees, this is a critical drawback. Projects like meme coins are especially fee-sensitive, making Ethereum-based L2s less attractive.

Lack of interoperability between L2s. The scalability argument for having multiple L2s only holds if contracts on different L2s can interact freely. However, rollups are essentially independent blockchains, and accessing data from one rollup to another is as challenging as cross-chain communication. This lack of interoperability significantly limits the potential of L2 scalability.

What can L2s do to further scale?

Embed features to enhance interoperability. Ethereum L1 needs to do more to support interoperability among L2s. For example, the recent ERC-7786: Cross-Chain Messaging Gateway is a step in the right direction. While it doesn’t fully resolve the interoperability issue, it simplifies communication between L2s and L1, laying the groundwork for further improvements.

Architectural updates: Diverge from the existing L1 design. To compete with multithreaded blockchains like Solana, L2s must break free from Ethereum’s single-threaded EVM design and adopt parallel execution. This may require a complete overhaul of the EVM, but the potential scalability gains make it a worthwhile endeavor.

Future milestones

Ethereum’s L2 solutions face significant challenges in delivering the scalability and cost-effectiveness that applications like meme coins demand. To stay competitive, the ecosystem must address fundamental architectural limitations, enhance interoperability, and embrace innovations in blockchain design. Only by doing so can Ethereum L2s achieve the scalability needed to support widespread adoption and fend off competition from emerging blockchains like Solana.

Laurent Zhang

Laurent Zhang is the president and founder of Arcology Network, a revolutionizing Ethereum layer-2 solution with the first-ever EVM-equivalent, multithreaded rollup—offering unparalleled performance and efficiency for developers building the next generation of decentralized applications. With an executive leadership and innovation background, Laurent holds a degree from Oxford Brookes University. Laurent’s professional journey includes over a decade of experience in science, research, engineering, and leadership roles. After graduating in 2005, he joined MKS Instruments as an Algorithm Engineer. From 2010 to 2012, he worked as a research engineer at the Alberta Machine Intelligence Institute, followed by a position as a research scientist at Baker Hughes from 2012 to 2014. He then served as vice president of engineering at Quikflo Health between 2016 and 2018. Since 2017, Laurent has been the president of Arcology Network, being a visionary of a future where blockchain technology reaches its full potential, offering unmatched scalability, efficiency, and innovation.

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Blockchain

Horizen spikes 60% to lead gainers as BTC, ETH bounce

Published

3 days ago

December 20, 2024

admin

Horizen price spiked more than 60% in 24 hours as the cryptocurrency market looked to recover from a massive dump that saw top altcoins crash to key support levels.

On Dec. 20, as Bitcoin (BTC) traded to above $97k and Ethereum (ETH) bulls pushed above $3,400, the price of Horizen (ZEN) surged to highs of $26.34. The cryptocurrency, which rallied sharply following a recent Grayscale Investments announcement, reached a multi-year high and ranked among the top gainers in the 500 largest cryptocurrencies by market cap.

ZEN traded at lows of $14.55 on Dec. 19. However, despite the broader crypto crash and the staggering $1.4 billion liquidations, the altcoin’s price hovered above $26 in early trading during the U.S. trading session.

According to crypto.news price data, Horizen recorded a 24-hour trading volume of over $397 million, with its market cap exceeding $407 million. These metrics reflected increases of 294% and 62%, respectively, in the past 24 hours. While ZEN has surged nearly 200% over the past month, its current levels are still more than 84% below the all-time high of $168 reached in May 2021.

If the broader crypto market continues to rebound, ZEN bulls may aim for March 2022 highs near $50.

The positive momentum has benefited from Grayscale opening of the Grayscale ZEN Trust to qualified investors. Prices of the altcoin rose as the digital asset manager unveiled the fund to offer exposure to Horizen for qualified investors.

Earlier this month, Horizen’s native token underwent its final halving, which came as the project geared for a key change in its tokenomics. ZEN will not see any further halvings as the new network mechanism enables a declining emission rate.

That’s because Horizen, is shifting from the proof of work mining model that mirrored Bitcoin’s halving cycle to a new proof of stake mechanism in 2025. Horizen’s last halving occurred on Dec. 12, 2024.

New tokenomics for Horizen will come into effect in the first half of 2025.

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Alpha

World’s Largest Crypto Exchange Rolls Out ‘Binance Alpha’ Feature to Spot Early-Stage Projects With Potential

Published

6 days ago

December 17, 2024

admin

Binance, the largest crypto exchange in the world by volume, is launching a new wallet feature aimed at shining a spotlight on nascent crypto projects.

According to a new Binance announcement, Binance Alpha is “a new platform within the Binance Wallet that shines a spotlight on early-stage crypto projects with the potential to grow within the Web3 ecosystem.”

The press release says the platform is committed to enhancing transparency in Binance’s token listing process by prioritizing projects that showcase strong community engagement, substantial traction, and alignment with key crypto trends.

Binance Alpha is part of Binance’s broader effort to promote innovation and expand the Web3 ecosystem by connecting users with promising blockchain projects at an early stage, per the announcement.

Binance says the new system includes the following features:

“Spotlight on Innovation: Explore tokens gaining traction in Web3, providing a deeper understanding of projects that matter in the evolving crypto landscape.

Quick Access: Seamlessly purchase tokens through the Quick Buy feature directly from the Binance Wallet. It optimizes the existing Swap functionality, resulting in a higher successful transaction rate and better prices compared to other DEXs or trading bots…

Educational Insight: Learn about emerging projects, their use cases, and the narratives driving their popularity within the blockchain ecosystem.

Expert Curation: Featured tokens are selected using Binance’s advanced insights and observation list, ensuring they align with market trends and community interests. While there is no guarantee, some tokens may be considered for listings on Binance Exchange in the future.”

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Blockchain

Solana gains top spot in daily net inflows with $12M, beating all other blockchains

Published

1 week ago

December 16, 2024

admin

Solana’s daily net inflows have surpassed all other major blockchains, including Sui, Base, Arbitrum and Ethereum. On Dec. 15, the Solana network accumulated net inflows of $12 million.

According to data from Artemix.XYZ, Solana (SOL) recorded the highest number of daily net inflows among the top 20 major blockchains on Dec. 15. Solana’s net inflow of $12 million was larger than the other two blockchains in the top 3, Arbitrum (ARB) and Sui (SUI), combined.

Solana regained the top spot a month after the blockchain last held it on Nov. 17 with $17.6 million. On Dec. 15, Solana dethroned Arbitrum, yesterday’s reigning champion, which held the number two spot with a daily net inflow of $5.9 million.

Solana gains top spot in daily net inflows with $12M, beating all other blockchains - 1 — Data from Artemis.XYZ showed Solana gained the top spot for daily net inflows on December 16, 2024 | Source: Artemis.XYZ

In third place, Sui accumulated a daily net inflow of $5.3 million, followed by OP Mainnet with $2.2 million and Base with $2.1 million. At the very bottom of the list is the Ethereum (ETH) blockchain with a net outflow of $25.4 million.

A recent surge in Solana revenue is often linked with a similar surge in the meme coin sector, specifically from pump.fun, a launchpad site for Solana-based meme coins. But that is not the case this time around.

According to data from Dune analytics, pump.fun saw its daily revenue dip slightly by 6% from $2.67 million on Dec. 14 to $2.51 million on Dec. 15. Pump.fun’s revenue peaked on Nov. 23 with $14.3 million, but has failed to pass the $5 million mark ever since.

Solana’s end-of-year sprint

In the past few months, Solana has achieved quite a few milestones as the year is nearing its end. As previously reported by crypto.news on Dec. 13, Solana was deemed the fastest-growing blockchain, with an annual growth of up to 83%. Solana even surpassed the largest blockchain in the world, Ethereum.

In November, Solana’s monthly decentralized exchange trading volume reached $109.73 billion, surpassing the $100 billion threshold for the first time in crypto history. The leap in Solana’s trading volume came a few days after Solana’s price went beyond $200 for the first time in seven months of trading after a 8.69% rise. The token later reached an all-time high of $263.21 on Nov. 23.

At the time of writing, Solana is currently trading hands at $220.76, having gone up by nearly 2% in the past 24 hours of trading, according to data on crypto.news. Solana has a market cap of around $105 billion and a fully diluted valuation which stands at more than $130 billion.

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