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Making sense of Ethereum’s Layer 2 scaling solutions: state channels, Plasma, and Truebit

Josh Stark
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A detailed conceptual understanding of how layer 2 solutions work.

The scaling challenges of public blockchains

  • Refers to a collection of challenges that must be overcome to make Ethereum useful to a global user base of billions of people.
  • Core limitation is that public blockchains like Ethereum require every transaction to be processed by every single node in the network. 

Layer 2 solutions are cryptoeconomic solutions

  • Cryptoeconomic consensus gives us a core hard kernel of certainty.
  • We can use this core kernel of certainty as an anchor — a fixed point to which we attach additional economic mechanisms.

State Channels

  • Rely on availability. 
  • They’re useful when participants are going to be exchanging many state updates over a long period of time.
  • Best used for applications with a defined set of participants.
  • Offers strong privacy properties and instant finality.


  • Create a set of smart-contracts on Ethereum main-chain that serve as the “Root” of our Plasma child-chain.
  • Lets us scale interactions with blockchain-based digital assets, but those assets should be created first on the Ethereum-main chain.
  • When a user wants to play the game, they are only interacting with the child chain.


  • You can always withdraw your funds and assets back onto the main chain.
  • Block producers can censor users of the child-chain.


  • Won’t let us do more transactions, but it will let Ethereum based applications do more complex things in a way that can still be verified by the main-chain.
  • You pay someone else a small fee to do the computation off chain.
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