2021 could be the year of Ethereum’s Layer-2 solutions.
Synthetix and others of these protocols will be used to make transactions faster and cheaper.
Some protocols could use Uniswap-style airdrops to attract new users.
If 2020 was the year Ether (ETH) surpassed itself, then 2021 could be the year of Ethereum’s Layer-2 protocols, also known as “solutions”. So which solutions offer the best yield mining , and which ones could launch an airdrop ?
Why does Ethereum need Layer-2?
Ethereum’s network fees are currently very high. Let’s be honest, Ethereum does have a gas problem. Although Ethereum 2.0 has been in the works for years and Beacon Chain has been launched, the protocol has not grown fast enough to support its popularity. At best, Ethereum can still only process around 30 transactions per second, and competition for a place in the network has led to average fees of over $ 15.
Additionally, one of the main drivers of ETH growth is decentralized finance ( DeFi ). Whether it’s lending, borrowing, or decentralized trading, users pay a hefty premium to use the world’s largest smart contract system. It seems logical: the technology works, it has a huge core of developers, and it is proven to be secure.
One of the points of blockchain, however, is to make fast payments around the world for pennies, isn’t it? So while Ethereum 2.0 won’t change transactions instantly until at least December 2021, some shrewd developers have come up with some ingenious solutions: Layer-2.
How Layer-2 Solutions Work
Layer-2 solutions vary in function and purpose, but the basic idea remains the same – it is a faster copy of the Ethereum network, where users can transfer their funds, do their business quickly, and for less than a dime and then get them out.
So if Layer-2 is so fast and economical, why isn’t everyone using it already? Because you still have to deposit or exchange ETH or ERC-20 tokens to simply have access to the system, and the fees for this remain high. In addition, its exchanges lack the liquidity and variety that Ethereum-based exchanges enjoy.
Recently, several Layer-2 solutions have appeared, in particular those connected to Uniswap-type Automated Market Creators (AMMs). Could Layer-2 then save Ethereum in the short term?
What Layer-2 solutions could then distribute tokens by airdrops?
Perhaps a more important question is, “How do I use Layer-2 solutions to make money”? Here are three Layer-2 protocols to watch out for, and maybe even interact with.
Loopring (LRC) and its exchange of the same name
Uniswap’s lunar ascension may be running out of steam, but AMMs are not going to go away. That said, Uniswap’s fees to unlock tokens and trade are astronomical, and people turn off.