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OMG, skale and IDEX use different layer2 solutions. This paper briefly describes the different methods and characteristics of each mechanism. Different mechanisms will also lead to different directions of target use cases. In a word, I believe and look forward to the arrival of L2, when Defa will really explode.
The gas cost of Ethereum is rising steadily. As costs continue to break through record highs, non whale users are slowly being excluded from DFI as gas fees are reducing their profits. In addition, many non defi applications, such as games, will become unavailable on Ethereum L1.
Ethereum gas price breaks new high recently
With the increasing demand and popularity of Ethereum, transaction costs may continue to rise. In order to solve this problem, many projects, including OMG network, skale network and idex, are developing scalability solutions, which can significantly reduce users’ costs, improve their transfer processing speed, and allow users to control their assets.
Tether on OMG network
Tether (usdt) is the most mobile stable chain in the whole blockchain ecosystem. Tether has a market capitalization of $15 billion and often trades more than bitcoin and Ethereum. Historically, it is the highest gas consumption contract compared with other smart contracts on Ethereum (which recently surpassed other smart contracts on tether). On August 19, bitfinex, the publisher of tether, integrated OMG networks to enhance tether’s user experience.
In order for exchanges and users to use tether on the OMG network, they must first store tether in the smart contract of Ethereum L1. Once tether is stored, users can transfer money to tether on the OMG network. The OMG network of L2 is composed of its own blockchain, which is generated by a single operation. After each block is added to the OMG network chain, the operation will commit the Merkle root of the transaction in each OMG block on Ethereum L1.
A “watcher” is used to make a single block generator responsible. The watcher looks at all the data generated by a single block generator. If the block generator submits invalid information or attempts to spoof the network, the watcher uses the Merkle root submitted to Ethereum L1 to determine whether invalid activity has occurred. If invalid behavior is detected, the watcher informs the user that the user has time to challenge the invalid behavior, and then safely withdraws the funds.
Bitfinex will use the OMG network to facilitate the transfer of tether between large exchanges. The OMG network is driven by a plasma implementation called morevp, which is audited by quantstamp.
Developing new use cases with skale network
Skale network intends to support new decentralized use cases, not only reducing transaction costs, but also allowing DAPP developers to deploy their own customizable skale chains to support new decentralized use cases to meet the unique needs of their applications. Layer 2 of Ethereum is called elastic side chain in skale network.
Each elastic side chain is dedicated to a decentralized application. As a developer, you have a lot of flexibility to design your own functions. For example, because the skale network charges a fixed monthly fee, developers can greatly reduce the transaction costs of users by completing thousands of transactions off the chain and updating them to the Ethereum main network only when necessary. Moreover, these elastic side chains are not limited by Ethereum storage and computing. If the dappp operators need more storage space or computing power to run their applications, they can pay the required fees.
The node processor can run multiple chains. Each side chain is dedicated to one DAPP
Skale network is well suited for potential use cases that are too expensive to run on the Ethereum main network alone. For example, it is not advisable for users to play blockchain based games directly on Ethereum because they need to make 10 to 100 transactions per game session, which can be very expensive. On the skale network, users can play their games without worrying about expensive transactions, while maintaining ownership of in-game assets. Users only need to make Ethereum transactions when entering or exiting the elastic side chain.
Quantstamp reviews the components of the skale manager smart contract system that affect the skale network nodes, validators, and elastic side chains. Quantstamp also audited the skale allocator contract, which manages the skale token investment structure for investors.
IDEX and optimized optimal Rollup
IDEX is a decentralized clearing house and plans to add optimized optimal rollup (layer 2 solution) later this year to enhance the user experience. Since IDEX was established in October 2017, IDEX users have paid more than $7 million in gas fees. In order to reduce the user’s gas cost and speed up the transaction, IDEX plans to migrate the transaction execution and user balance to layer2 execution.
The Merkle root that stores the layer2 block allows the watcher to mathematically prove whether malicious or invalid behavior has occurred
The working principle of optimized optimal rollup is very similar to that of OMG network. All layer 2 blocks are produced by idex, a block producer. The Merkle roots of transactions in these blocks are stored in the layer1 smart contract to ensure that a single block producer is responsible.
The verifier nodes in IDEX’s optimized optimal rollup have the same function as watchers in OMG networks: they monitor all activities of block generators to detect invalid or malicious behavior. A key difference is that IDEX validators prevent invalid data from being accepted by the layer1 smart contract. This means that if an invalid layer2 block is published, the user does not have to perform the operation. Any single verifier that can prove fraud in an encrypted way can prevent the resolution of invalid blocks, in which case the state will be automatically restored to the state of the previous valid block.
Quantstamp recently reviewed the on chain components of idex2.0 upgrades.
The future expansibility of Ethereum
Many people think that high fees are not good for Ethereum. However, high fees are also a sign of Ethereum’s success. High costs are also driving the development of layer2: many of the leading defi projects are already brainstorming for solutions that can drive and connect liquidity on layer2.
Eth2.0 will reduce costs and create more space to support financial activities of much larger scale in combination with layer2 expansion scheme. Ethereum is preparing to attract as much global economic activity as possible and will continue to grow at an astonishing rate.