GameFi Public Chain Research (II): Layer 2 and Optimistic Tracks

Introduction

In the previous article, we introduced the development history of Ethereum and the basic information about the Ethereum 2.0 upgrade, leading to the two main sub-tracks of Layer2: Optimistic Rollup and ZK Rollup. If we compare Ethereum to a company, the Ethereum 2.0 upgrade is equivalent to restructuring the internal management structure of the company, transforming from the original chain structure to a hierarchical structure of beacon chain and shards. Layer2 further outsources the tasks that need to be executed on this hierarchical structure, reducing the company's burden, improving efficiency, and enhancing the overall task processing capacity.

This article will further explore Layer 2 solutions and conduct an in-depth analysis of the Optimistic Rollup track.

Overview of Layer2 Solutions

Layer 2 refers to off-chain networks, systems, or technologies based on the underlying blockchain (Layer 1), used to scale the underlying blockchain network. Layer 2 can be classified in two ways: narrow and broad.

Narrowly defined Layer 2 needs to inherit the security of the Ethereum chain and bundle transactions to be submitted to Ethereum, while Layer 2 is only responsible for computation. ZK and Optimistic Rollup are the orthodox Layer 2.

Broadly, Layer 2 includes all Ethereum scaling solutions, mainly consisting of 5 types:

1. Sidechain: an independent blockchain that operates in parallel with Ethereum. The representative project is Polygon.

2. State Channel: Establish exclusive payment channels and multi-signature addresses between traders to complete off-chain transactions. Representative technologies include the Lightning Network and the Raiden Network.

3. Rollups: Delegate data execution work to Layer 2 and batch submit to the main chain. There are two types: Optimistic Rollup and ZK Rollup.

4. Validium: Uses zero-knowledge proofs, but only uploads the state root and proof to the mainnet, while the transaction data is stored on Layer 2. ImmutableX uses this technology.

5. Plasma: Known as "chain within a chain". It transfers transactions to a child chain, which periodically submits state updates to the main chain.

This article will focus on analyzing the sidechain solution Polygon PoS, the Optimistic Rollup projects Arbitrum and Optimism, as well as the BNB ecosystem projects opBNB and COMBO based on Optimistic Rollup.

Polygon PoS Analysis

Introduction to Polygon

Polygon, originally named Matic, was initially a blockchain scalability platform, referred to as "the blockchain internet of Ethereum." With the development of its ecosystem, Polygon has expanded from a single Layer 2 solution to a "network of networks," aimed at addressing the transaction speed and scalability issues of the Ethereum mainnet, primarily focusing on areas such as blockchain gaming and NFTs.

Polygon PoS is the foundation of Polygon, while the ZK Rollup matrix composed of Polygon zkEVM, Polygon Miden, Polygon Zero, and Polygon Nightfall serves as a potential growth point for Polygon. Polygon is preparing to upgrade the entire Polygon PoS to zkEVM Validium.

technology

Polygon PoS, while based on Ethereum, has faster transaction speeds and higher scalability. Its daily transaction volume is approximately twice that of the Ethereum mainnet, around 2 million transactions, while the gas fee is only 0.1% of Ethereum's.

Polygon PoS is an EVM-compatible sidechain that went live on June 1, 2020. Its architecture is divided into three layers:

1. Ethereum Layer: Composed of Ethereum smart contracts, responsible for handling processes on Ethereum, utilizing Ethereum's security as a shield. Matic tokens are staked on this layer.

2. The Checkpoint Node Layer of PoS: Core Layer, responsible for producing and verifying Matic sidechain blocks. PoS nodes listen to events on the Ethereum chain, relay information to the Matic sidechain, and regularly publish the blocks generated by Matic to the Ethereum chain to achieve information synchronization.

3. Matic sidechain layer: responsible for transactions, shuffling, and block creation, and regularly publishes checkpoints to the node layer.

This hybrid structure allows Polygon POS to support the Plasma framework, inheriting the security of Ethereum. The PoS Bridge further ensures the security of the chain itself through the same set of validators and staked MATIC.

( ecology

Polygon was launched in 2020 and entered its explosive period in Q2 2021, becoming the third public chain with a complete ecosystem after Ethereum and BNB. By the first quarter of 2023, there were more than 53,000 projects in the Polygon ecosystem.

In terms of DeFi, Polygon leveraged the booming development of DeFi in its early stages, attracting leading projects like Uniswap, Aave, and Curve. In April 2021, Polygon launched a $150 million DeFi development fund. Currently, Polygon's on-chain TVL ranks fifth, having been surpassed by Arbitrum.

In terms of NFTs, Opensea was the first to support the Polygon chain in June 2021. Currently, many international brands such as Starbucks, Mastercard, and Adidas have launched NFTs on Polygon. Popular NFT projects include Lama Kings, Doodle Changs, y00ts, etc.

In the fields of gaming and the metaverse, the number of active gaming projects on the Polygon chain has reached 468, second only to BNB and Ethereum. The metaverse projects Decentraland and The Sandbox were deployed on the Polygon chain as early as 2021. Other popular games include Pixels, Arc8, Benji Bananas, and more.

In July 2021, Polygon established Polygon Studios, focusing on investments in the NFT, Gaming, and Metaverse sectors.

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( Summary of Advantages and Disadvantages

Advantages of Polygon PoS:

• Fast Speed: Transaction speed can reach up to 7000 TPS, far exceeding Ethereum's pre-upgrade 15 TPS.
• High security: relies on Ethereum and shares its security
• Good compatibility: Fully EVM compatible, can directly deploy Ethereum smart contracts.
• Low cost: gas fees are about 0.1% of Ethereum's.

The low trading fees and considerable speed make Polygon the best choice for high-frequency trading projects. Although it faces the rise of Layer 2 projects like Arbitrum, Optimism, and zkSync, Polygon is also continuously evolving and fully embracing the ZK track.

The timing for entering the market with Polygon PoS was appropriate, as it was launched in 2020 during a period of severe congestion on the Ethereum network, meeting the market's demand for high-performance scaling solutions. Its market strategy was well-executed, initially leveraging DeFi to gain momentum, and employing a subsidy leader strategy to attract multiple DeFi giants; it adopted an investment + incubation strategy for extensive layout in the gaming and metaverse sectors; and it deeply cooperated with platforms like ImmutableX to share traffic dividends.

With the further improvement of the Polygon ecosystem and the gradual maturity of the ZK ecosystem, Polygon is expected to usher in a new round of growth, consolidating its position in the top tier of public chains.

Arbitrum Project Analysis

) Introduction to Arbitrum

Arbitrum, as a leading Layer 2 project, has garnered significant attention, especially during the token issuance period in the first half of 2023, becoming a hot topic in the blockchain community. According to DeFiLlama data, Arbitrum ranks fourth in total locked value, surpassing Polygon and becoming the leader in Layer 2.

Arbitrum's main development history:

• May 2021: Arbitrum One launched on the Ethereum mainnet
• October 2021: Arbitrum Nova testnet launched
• 2022: Promote the Arbitrum Orbit project, a Layer 2 solution specifically for NFT and VR applications.

Current Arbitrum data:

• TVL: 5.93 billion USD
• Circulating Market Cap: 1.45 billion USD
• FDV: 11.3 billion USD
• Daily active addresses: about 150,000
• Daily transactions: about 620,000

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( technology

Arbitrum is a layer 2 scaling solution based on Optimistic Rollup technology. Its working principle:

• Assume that all transaction verifications are honest, but set a challenge period for questioning.
• Introduce two roles: validators and aggregators to ensure transactions.
• Validators process transactions and receive rewards, aggregators monitor validators.
• The transaction returns to the Ethereum mainnet after a 7-day challenge period.
• As long as there is at least one honest aggregator during the challenge period, safety can be guaranteed.

Arbitrum main product line:

1. Arbitrum One: Based on Optimistic Rollup, it provides fast and low-cost smart contract execution. Most DeFi and NFT applications are deployed here.

2. Arbitrum Nova: Uses zk-Rollup technology to enhance security and efficiency. Mainly used for high throughput applications such as GameFi and social gaming.

3. Arbitrum Orbit: Ecosystem development plan, providing tools, libraries, and support for developers.

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( ecology

The Arbitrum ecosystem has reached 600 projects, including high-quality projects such as GMX, Radiant, TreasureDAO, and Camelot. Game projects like Treasure DAO and Pirate Nation have performed exceptionally well, bringing significant activity to Arbitrum.

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( Summary of Advantages and Disadvantages

Arbitrum Advantages:

• High performance: Optimize smart contract execution, increase transaction throughput, reduce costs
• Low cost: significantly reduce Gas fees
• Compatibility: Compatible with Ethereum smart contracts
• Security: Utilizes security measures expanded by Layer 2
• Ecological support: Attract well-known projects to provide users with more choices

Disadvantages of Arbitrum:

• Higher degree of centralization
• New user learning curve
• Network effects still need to be established
• Asset liquidity fragmentation

Overall, Arbitrum has significant advantages in terms of performance, cost, and compatibility, but still needs to address challenges such as centralization and network effects. As Layer 2 technology continues to develop, Arbitrum is expected to enhance the scalability and user experience of the Ethereum ecosystem.

Optimism Project Analysis

) Introduction to Optimism

Optimism is an Ethereum Layer 2 solution that moves transaction processing to the Optimism chain, recording only the final results on Ethereum, significantly reducing transaction fees.

The development history of Optimism:

• Early 2020: Project launched and white paper released
• End of 2020: Launched testnet
• End of 2021: Mainnet officially launched

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( technology

Optimism uses Optimistic Rollup technology, and its core component OP Stack consists of four parts:

1. Mainnet: A low-cost and fast Ethereum L2 network, compatible with EVM.

2. Contract: Smart contracts that implement the core logic and functions of the OP Stack.

3. Services: Providing data availability, synchronization, and communication services between L1 and L2.

4. Tools: Tools for development, testing, deployment, monitoring, and debugging.

The OP Stack architecture is divided into six layers:

• DA Layer: Data Availability Layer
• Sequencing Layer: Sequencing Layer
• Derivation Layer: Derivation Layer
• Execution Layer: Execution Layer
• Settlement Layer: Settlement Layer
• Governance Layer: Governance Layer

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( ecology

Optimism's DeFi ecosystem is relatively complete, including:

• Velodrome: The largest DEX on OP
• Sonne Finance: the native lending platform of OP

In the GameFi field, the highlight of Optimism is OP Craft, developed based on the OP Stack, which pioneered the concept of Onchain Autonomous World).

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) Summary of Advantages and Disadvantages

Advantages of Optimism:

• EVM equivalence: Highly compatible with EVM
• Data Security: Inherits Ethereum's Security
• Speed: Fast transaction speed, close to instant confirmation
• Cost: The transaction cost is about 1% of Ethereum.

Disadvantages of Optimism:

• Withdrawal time is long and costs are high
• There may be incentive misalignment among network participants.
• The underlying L1 may censor transactions.

opBNB and COMBO Project Analysis

( opBNB

opBNB is a layer 2 network built on the BSC based on OP Stack technology, aiming to enhance the performance of BSC. Main features:

• Increase the Gas limit to 100M, exceeding Optimism's 30M.