implement some DApps-like functionality on
Bitcoin, often by building a second layer of protocols
on top of Bitcoin. For example, by using the Bitcoin
Lightning Network, it is possible to implement faster,
lower-cost payment channels that are not DApps in
the traditional sense. The Lightning Network is the
earliest and most viable Layer 2 in the crypto world.
BTC's Lightning Network does not go onto the main
network for day-to-day transactions, thus saving on
costly Gas, and if both parties believe they will no
longer be able to transact, they can send a message to
the main network to make the transaction. When they
believe they will no longer trade, they can initiate a
withdrawal command to the mainnet, the signature of
which proves to the BTC mainnet the authenticity of
a series of transactions between the two parties off the
mainnet.
Lightning Network (LN) is a layer-2 protocol that
enables fast Bitcoin transaction processing. However,
it only works well for peer-to-peer micro-payments,
namely, small-amount payments between individual
parties. Wang et al. (2023) propose an LN-based
framework for both peer-to-peer and customer-to-
business payments, the Business-oriented Layer-2
Network (BLN). With BLN, Bitcoin transaction
processing scales much better. Their experimental
results indicate that BLN outperforms LN in terms of
transaction failure rate, transaction fee, and
processing time.
The 2021 Bitcoin Taproot upgrade introduced
Schnorr signatures (Schnorr 1991, Maxwell 2019,
Cragg et al. 2015) and MAST contracts (Kim et al.
2018), enhancing Bitcoin's cross-chain
decentralization. Schnorr signatures, more efficient
than elliptic curve signatures, enable clustering of up
to 1,000 addresses to manage the same asset,
improving privacy and reducing data load. This
breakthrough surpasses Bitcoin's previous 15 re-multi
signature limit, allowing for fully decentralized
signature management. MAST contracts, using
Merkle trees, encrypt complex scripts whose
components don't overlap. These contracts, similar to
smart contracts, require only relevant script
disclosure for transactions, simplifying and securing
operations.
2.3 ETH Layer 2 Solutions
Unlike Bitcoin, which focuses on its role as a digital
gold and store of value and adopts a more
conservative upgrade strategy to ensure the stability
and security of the network, Ethereum has an active
community of developers, with several developers
who can build a variety of complex decentralized
applications on it and experiment with and research
Layer 2 solutions, scaling technologies. Ethernet
adopts a flexible scaling mechanism, which provides
more opportunities for Ethernet to realize Layer 2,
thus realizing the vision of higher throughput and
lower transaction costs. Ethernet's Layer 2 solution
utilizes a variety of technologies, some of the
common ones include Optimistic Rollup, zk-rollup,
Plasma, State Channels, Sidechains and others.
Optimistic Rollup and ZK-Rollup are two
blockchain scaling technologies that both aim to
improve the throughput and scalability of the
blockchain, but differ in their implementation
methods and characteristics. Optimistic Rollup
implements a sidechain on the Ethereum blockchain
that assumes all transactions are valid unless proven
wrong. This hypothetical verification approach
reduces the need for immediate computation and
allows for higher throughput. The advantages are
higher throughput and good compatibility with
Ethereum. Because of the optimistic assumption, it
can process more transactions. Easy integration with
the existing Ethereum ecosystem and smart contracts.
Depends on the security of the Ethereum main chain.
The downside is that if fraud occurs, it takes a while
to submit and confirm proof of fraud, which can lead
to delays and additional transaction costs. And need
to rely on the main chain to ensure the availability of
data.
ZK-Rollup uses Zero-Knowledge Proofs to prove
the validity of all sidechain transactions, rather than
assuming they are valid, as Optimistic Rollup does.
This means that every transaction needs to be verified
in real-time. It offers instant transaction final
certainty, higher security, and data availability.
Thanks to the use of zero-knowledge proof,
transactions can be determined quickly without a long
window of challenge. Zero-knowledge proofs
provide strong security. Since every transaction is
verified, data availability is guaranteed. The
disadvantage is that the calculation needs are high and
there are compatibility problems. Generating zero-
knowledge proofs requires a lot of computing
resources. Integration with existing smart contracts
and the Ethereum ecosystem is more complex. The
cost of developing and deploying ZK-Rollup
technology is relatively high.
Optimism, Arbitrum, Scroll, StarkNet, Polygon
zkEVM, zkSync Era, Blast, Linea, Manta Pacific,
Metis, zkFair, Ola, and Lumoz (formerly opside) are
all Layer 2 extension solutions. This is mainly
achieved by using Optimistic Rollups or ZK-Rollups
technology.