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.
- 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.