In the latest installment of Blockchain and Booze, Adam Levy of Draper Gorem Holm sits down with three major companies in blockchain trading to talk about Layer Two options in the Ethereum community. Levy is joined by Stani Kulechov from Aave, Jack O’Holleran from Skale and Antonio Juliano from dYdX. What began briefly as a dialogue of inflated charges was a major commentary on the potential power of decentralized funding.
The Ethereum riddle
For those unfamiliar with the state of affairs in Ethereum, it becomes unaffordable to send chain transitions. At the time of writing, the typical value for sending an Ethereum transaction is slightly under $ 20. Complicated, sensible contracts reminiscent of those in decentralized money logs can simply be worth over $ 100 as the community becomes more and more congested. Layer 2 options are protocols that lighten the load and enable much faster and cheaper transactions.
As Aave’s Kulechov explains, the disruptive potential of second-tier options is great. Not only are they extremely promising, but also a growing know-how that has not necessarily been applied:
“Many of them [layer-two] Developments on Ethereum usually don’t even apply. We’re still very early on in scale, but the huge variety of people who work in Level 1 is a problem. “
All three friends are advocates of Layer 2 options because they bring advantages to decentralized technologies. But how do these protocols really work? O’Holleran has a great instance: he compares the settlement phase of Ethereum with a poker sport and layer 2 options as a report on profits and losses.
Layer two, defined
Think of a group of friends arriving to play poker. After a full evening of play, players don’t go away with their winnings. Alternatively, they report them in a ledger on the desk. Individuals can play a variety of video games, report their winnings and losses, and just “spend” or use the accounting tier after they don’t want to play. Likewise, customers of Ether (ETH) and ERC-20 with layer two options such as Polygon can use the layer two community until they want to “pay off” their tokens on Ethereum.
Layer 2 networks expand the scope and open up the DeFi area for many who cannot or do not want to pay excessive fees for a single transaction. Based on O’Holleran, the main goal is monetary inclusion in the improvement neighborhood, which drives the introduction of cost-effective options. The more people can participate in DeFi, the stronger the DeFi community becomes.
Towards the top of the dialogue, Levy asks the group what the “end purpose” of DeFi is or what follows after DeFi’s “solution”. After a pause, O’Holleran talks about the potential that DeFis techniques have to offer the world as a whole:
“The efficiency of these techniques goes beyond DeFi. Marketplaces, social media, video games: all of these could be disrupted by decentralization. Finally, we want to democratize the means. “
Juliano agrees with this sentiment including:
“The purpose is, in fact, great. The monetary system is essentially the most authorized and reliable system on the planet. We will construct one thing in parallel in DeFi – initially small, but in the end it should be particularly worthwhile to use DeFi due to the higher interest rates. “
To insiders, the DeFi space might seem mature and big after it topped more than $ 100 billion not too long ago. For the money world, however, it’s a very small, practically odd score. While conventional funding in DeFi is currently “in response” to Juliano, much remains to be done behind the scenes. O’Holleran agrees with this assessment and predicts the long-term overlap between centralized and decentralized funding:
“The sane CeFi company will determine how it fits into DeFi and it will improve the DeFi space.”
Layer 2 options aren’t as flashy as the latest non-fungible token or bitcoin hitting a brand new all-time high, but if our experts are to be believed, they may be just as important.