Altcoins to Watch, Ethereum Layer-2 Solutions Expected to Rise in 2022

Zachary Williamson is a co-founder of Aztec Community, the primary non-public ZK roll-up on ethereum.
He breaks down why ethereum layer-2 options will develop into a much bigger deal within the 12 months forward.
He shares why builders have caught with ethereum regardless of the rise of different layer-one protocols.

Layer-one protocols like solana (SOL) and avalanche (AVAX) have dominated headlines this 12 months. Now, many crypto consultants predict ethereum (ETH) layer-two scaling options to shine within the 12 months forward.

The narrative across the development of layer-two platforms, which purpose to make transactions sooner and fuel charges cheaper on the ethereum blockchain, is already unfolding. Layer-one protocols discuss with the underlying most important blockchains like bitcoin and ethereum, whereas layer-two networks are sometimes third-party integrations that may be mixed with layer-one blockchains to enhance their scalability and effectivity.

Aztec Community, a privacy-focused scaling answer on ethereum, introduced on Thursday that it had raised $17 million in a Collection A financing spherical led by Paradigm and involving angel traders together with ethereum co-founder Vitalik Buterin. ConsenSys, the most important world blockchain software program firm, mentioned it has collaborated with fee large Mastercard to launch a scaling answer on ethereum on the identical day.

There are two most important kinds of layer-2 scaling options: (1) optimistic rollups comparable to Arbitrum and Optimism, (2) zero-knowledge (ZK) rollups comparable to zkSync and Aztec Community.

The whole worth locked in optimistic rollups and ZK rollups has surged to $3.3 billion and $1.9 billion, respectively, in line with The Block Analysis’s Digital Asset 2022 Outlook report.

“With Ethereum 2.0 shard chains scheduled for 2022, coupled with the potential of token distribution to decentralize L2 sequencer nodes, rollups are poised for even higher adoption in 2022,” the report mentioned.

Some great benefits of privacy-focused scaling options

To Zachary Williamson and Joe Andrews, the co-founders of Aztec Community, ZK roll-ups can’t solely enable cheaper and sooner transactions but in addition assist shield customers’ privateness.

“Zero-knowledge proofs are form of succinct and it is a proof of information as effectively. You should utilize that to not solely compress info being despatched to the chain but in addition conceal sure elements of that,” Andrews mentioned in an interview. “That is how we get the privateness component.”

Whereas it’s straightforward to grasp the good thing about cheaper and sooner transactions, the necessity for privateness to conduct monetary actions on blockchains doesn’t come intuitively. In spite of everything, blockchain is meant to make information and data clear. However Williamson thinks that it’s precisely the dearth of privateness that has prevented blockchain applied sciences from being mass adopted by the mainstream.

“Individuals aren’t going to make use of a blockchain like ethereum to settle US greenback funds as an alternative of the Visa, MasterCard community if all the pieces’s public,” Williamson, a particle physicist-turned crypto founder, mentioned. “If individuals’s Amazon funds, their salaries, and mortgage funds are all settled and streamed by means of a public ledger, that is not likely going to chop the mustard.”

With a scaling answer that protects privateness, customers may sometime pay pennies to transact on a decentralized blockchain as an alternative of two% to transact with a centralized community.

The vast majority of ethereum layer-two networks wouldn’t have token distribution besides Polygon (MATIC) and Loopring (LRC), which have returned 10,883% and 1,152% previously 12 months, respectively, in line with CoinGecko pricing.

Ethereum continues to be the place it is at

Regardless of the rise of rival sensible contract platforms this 12 months, ethereum continues to be essentially the most mature and liquid platform for builders like Williamson and Andrews.

As of Thursday afternoon, there was $163 billion in whole worth locked in decentralized purposes on the ethereum blockchain in comparison with the $250 billion whole worth locked in DeFi purposes on all blockchains, in line with DeFi Llama. Ether, the native token of the ethereum community, was buying and selling at round $4,008.

“On ethereum, you now have massive quantities of economic exercise, margin loans, massive buying and selling, and pairing,” Andrews mentioned. “Privateness is form of changing into a prerequisite to truly doing enterprise on the chain. If one other chain will get to the identical degree of maturity and mature monetary merchandise are constructed there, we are able to simply deploy that.”

Ethereum additionally supplies customers with the form of

liquidity

that makes privateness important.

“Privateness is pointless with out liquidity. You want significant worth to be kicking round earlier than your anonymity begins to matter,” Williamson mentioned. “Ethereum proper now’s this crucible of innovation. It is the nexus of all of this monetary creativity that is occurring throughout the blockchain ecosystem, which implies that that is the place all of the customers are. It is the place all the cash is.”

Because of this, merchants may benefit from the privateness of protecting their portfolios or buying and selling methods from the general public eye, whereas customers dwelling beneath authoritarian regimes may conceal their monetary standing from abusive powers, he added.