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Layer 2 Tokens on Ethereum: A comparison
Blockchain
Published on: Apr 4, 2024
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In Brief
Learn about some of the most popular Layer 2 tokens on Ethereum. Discover what they are, and how they contribute to the Ethereum ecosystem.
Over the last decade, the Web3 space has experienced considerable growth. In Ethereum’s case, this has uncovered scalability issues. These include high transaction fees (gas fees), network congestion, and slow transaction speed. To address this, over 40 Layer 2 solutions have emerged in the Ethereum ecosystem. So in this article, we’ll explore some of the top Layer 2 blockchains, and more specifically, the tokens that power them.
Before We Get Started
Before we explore Layer 2 tokens in more detail, it’s important to remember that you can use a secure crypto wallet, such as Trust Wallet to buy, sell, and manage Ethereum (ETH) and Layer 2 tokens.
You can also use Trust Wallet as your secure crypto wallet. Download Trust Wallet as a mobile app, or install the Trust Wallet Extension on your desktop browser.
What are Layer 2 Tokens?
Layer 2 tokens are digital currencies that work on Layer 2 solutions built on top of existing blockchains, like Ethereum. Layer 2 solutions aim to address scalability issues and high Ethereum transaction fees. This is undertaken by moving some of the computational workload off of the main blockchain. This increases throughput and reduces costs.
These tokens can represent various assets or functionalities. Layer 2 tokens leverage techniques such as sidechains, state channels, rollups, or other off-chain processing methods to improve efficiency, speed, and cost-effectiveness of transactions and smart contract executions on the underlying blockchain network.
Layer 2 tokens play a crucial role in expanding the utility and adoption of blockchain technology by enabling faster and more affordable transactions. Furthermore, Layer 2 tokens support a wide range of decentralized applications (dApps) and use cases.
Popular Ethereum Layer 2
Over the years, many Layer 2 tokens on Ethereum have emerged. Each token catering to distinct audiences, use cases, or scalability solutions. Let's explore some of the most popular Ethereum Layer 2 tokens:
Polygon
Polygon is a layer 2 protocol built on the Ethereum blockchain. Polygon stands out in the Layer 2 landscape with its unique approach. Unlike some of its counterparts that focus solely on rollup technology, Polygon offers a multi-pronged solution for scaling Ethereum.
Its core technology is Plasma, which enables the creation of sidechains. These sidechains operate parallel to the Ethereum mainnet, handling transactions off-chain for faster processing and lower fees. While Plasma forms the foundation, Polygon embraces flexibility by offering optional integrations with both Optimistic Rollups and zk-Rollups. This allows developers to choose the scaling solution that best suits their specific needs.
Polygon helps alleviate congestion on the Ethereum network, enabling faster and more cost-effective transactions. Its infrastructure facilitates the creation of scalable decentralized applications (dApps) and supports interoperability with other blockchain networks. Additionally, Polygon offers a user-friendly environment for developers to build and deploy smart contracts, fostering innovation and adoption within the Ethereum ecosystem.
Arbitrum
Arbitrum is a layer 2 scaling solution for Ethereum, designed to improve the network's scalability and reduce transaction fees. Developed by Offchain Labs, Arbitrum utilizes a unique approach called Optimistic Rollups to achieve these goals.
Optimistic Rollups allow for off-chain computation, where transactions are processed and verified off the Ethereum mainnet. This results in faster transaction finality and increased throughput. Once validated, the results are securely settled on the Ethereum blockchain, maintaining the network's security and decentralization.
Arbitrum brings several benefits to the Ethereum ecosystem, including improved scalability by increasing transaction throughput while maintaining compatibility with existing Ethereum smart contracts and dApps. Additionally, it helps reduce transaction costs, making decentralized applications more accessible and cost-effective for users.
Optimism
Optimism is a layer 2 scaling solution built on Ethereum, focusing on enhancing scalability and reducing transaction costs. Developed by Optimism PBC, it utilizes Optimistic Rollups to achieve its objectives.
Optimism brings several benefits to the Ethereum ecosystem. Optimism improves scalability by increasing transaction throughput. This scalability enhancement is crucial for supporting the growing demand for decentralized applications (dApps) and reducing congestion on the Ethereum network.
Additionally, Optimism helps reduce transaction costs by offloading computation from the Ethereum mainnet, making transactions more affordable for users. Lower transaction fees make decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and other Ethereum-based services more accessible to a broader audience.
Starknet
Starknet is a layer 2 scaling solution for Ethereum developed by StarkWare. It aims to enhance the scalability and privacy of Ethereum while maintaining its security and decentralization.
Starknet utilizes a technology called zk-STARKs (Zero-Knowledge Scalable Transparent ARguments of Knowledge) to achieve its objectives. zk-STARKs allow for efficient off-chain computation and data compression, enabling Starknet to process large amounts of data off the Ethereum mainnet. Once validated, the results are securely settled on the Ethereum blockchain.
Starknet brings several benefits to the Ethereum ecosystem. Starknet improves scalability by increasing transaction throughput and reducing latency, enabling Ethereum to handle a higher volume of transactions per second.
Additionally, Starknet enhances privacy by allowing users to interact with smart contracts and perform transactions without revealing sensitive information on the Ethereum mainnet. This privacy feature is particularly valuable for applications requiring confidentiality, such as financial transactions and identity management.
How to Buy Layer 2 Tokens Using Trust Wallet
You can buy Layer 2 tokens, using Trust Wallet, via our trusted partners. Here’s how:
Select “Buy” from the home screen.
Search for your desired Layer 2 token. We choose Arbitrum of this example. Search “Arbitrum” or “ARB” and select it.
Choose the currency you want to use, then enter the amount of ARB you want to purchase.
Select the third party provider & payment method you’d like to use.
Select the Buy button and complete the remaining steps.
Closing Thoughts
Layer 2 solutions play a vital role in addressing the scalability challenges faced by the Ethereum ecosystem. As demonstrated by Polygon, Arbitrum, Optimism, and Starknet, these solutions offer innovative technologies and approaches to improve transaction throughput, reduce fees, and enhance user experience on the Ethereum network.
The importance of Layer 2 solutions cannot be overstated. They enable Ethereum to support a growing number of decentralized applications (dApps) and use cases, making blockchain technology more accessible and practical for developers and users alike. By offloading computation from the mainnet and leveraging techniques such as sidechains, rollups, and zero-knowledge proofs, Layer 2 solutions like those discussed here pave the way for Ethereum's continued growth and evolution.
As always, remember to do your own research before interacting with any Layer 2 blockchain or token. And should you decide to explore Layer 2s, you can do it conveniently with Trust Wallet.
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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.
