Noticed a little sigh of relief within the crypto community, have you? There’s lots of green arrows all over crypto exchanges at the moment, which could signal that the Big Crash is finally letting up. Even big player Ethereum has risen by 9.91 percent over the last week, at the time of writing.
Maybe this has got you interested in crypto again, wondering if it’s worth putting some money you’d otherwise spend on disposable vapes into rising currencies. And if that’s the case, you probably also want to know which ones to invest in. Well, we can’t really tell you that with absolute certainty – we’re not fortune tellers and crypto’s a risky business.
What we can do, though, is give you a sense of what people in the crypto community are getting most excited about. Because if anyone knows, it’s probably that lot, isn’t it?
At the moment, most of the buzz centres around a certain category of crypto projects (and their cryptocurrencies) called “Layer 2”. Other examples of categories include things like the Metaverse and memecoins, both of which you might have heard about. But Layer 2 is a bit more technical than merely being a meme of a coin, so let’s explain what it is first.
Layer 2 is basically a scaling solution, which blockchains desperately need if they’re going to become adopted by the wider world. The current Ethereum network, for example, can only handle around 30 transactions per second, whereas VISA can do 65,000 transactions per second. Both get delays as a result, but obviously 30 compared with 65,000 is pretty bad. With Ethereum 2.0 (an upgrade to Ethereum that you can think about as a software update for ease, although there’s a bit more to it), the company says they should be able to manage 100,000 transactions per second, which would make it almost twice as fast as VISA.
To do that, Ethereum needs to find solutions to help it scale up from 30 to 100,000 transactions per second. The general consensus is that instead of trying to scale Ethereum’s blockchain on its own (which might risk security and decentralisation), they’ll probably be looking to outsource a lot of the transaction processing – a bit like when your landlord finally hires a handyman to fix that broken shower head, instead of doing it themselves. These outsourced teams are your “Layer 2” solutions.
There’s more technical stuff within Layer 2, as some of the projects operate differently to others. There’s rollups, such as ZKrollups and Optimistic Rollups, which both do things slightly differently. A ZK-rollup is quicker but doesn’t read the smart contract in a transaction, it just assumes all is calm (loosely). An optimistic rollup is kind of the opposite: it reads smart contracts but is consequently slower. Both are a form of outsourcing. Along with rollups there’s also sidechains, plasma and channels. They’re all long to explain, but essentially, they involve different ways of scaling and outsourcing transactions, offering different tools that allow the scaling to happen.
This technology is why people are getting excited again in crypto circles. Being able to speed up transactions also makes them cheaper, and if these transactions are quicker, cheaper, more secure and more anonymous than VISA and every other fiat system, then more people might well be persuaded to get involved.
Believing in the use case for something is as good a reason as any to invest in something. But there’s a fair few projects within this category and, as ever, some are pretty good, others are outright scams. So if you’re planning on getting involved, do your homework. Let’s talk about the ones people are most into at the moment.
This is probably the most well-known Layer 2, as it’s the 14th most popular cryptocoin in general at the moment. Why? It’s a sidechain, which means it can just sort of work with Ethereum as a back door, where others can do the work and chuck it back across to the Ethereum blockchain. Simple, effective. It’s also a series of blockchains that are compatible with Ethereum, so they can, in theory, be used to scale Ethereum through the use of rollups as well as sidechains, which we mentioned earlier on. Don’t worry too much about what it means though. The big takeaway is that Polygon has range.
This is a Layer 2 project that uses those optimistic rollups we also just mentioned briefly. These are slower than ZK-rollups, remember, which is a big downside, but they allow the use of smart contracts which is a big plus. Life is all about balance, innit. Another big reason why Metis is getting attention is because its manager is Natalia Ameline, the mother of Ethereum’s creator Vitalik Buterin. You’d think that really, any good son isn’t going to mug his mum off by letting her be associated with a shite idea that’s directly trying to help her son’s Ethereum blockchain, right? Of course, that doesn’t guarantee success. Buterin can’t predict the future and Ethereum could possibly fail somehow (although that seems unlikely relative to other crypto). But yeah, his mum is on the board, so people are paying attention. It’s also a bit more under the radar right now, ranking 229th by market cap.
This another (and slightly contentious) player in the Layer 2 zone. People who have invested in it seem very much convinced it’s destined for success. This is partly because it’s a ZKrollup, which they think is technology that’s invaluable and necessary if Ethereum wants to succeed, and partly because Loopring already has ties with companies such as GameStop. But it also seems to often evade media attention and very much sits in the shadows. At the time of writing, it is the 75th most popular cryptocoin – way behind the likes of Polygon. Still, those who love it, really love it. Are they all wrong? We’ll let you know as soon as our crystal ball arrives in the post.