Gate.io Research: The Development Status and Prospect of Layer 2 Protocol

As blockchain technology has been applied to a wide variety of fields, there is a more prominent call from the community to enhance blockchain processing speeds. Therefore, the capacity expansion technology has gained increasing traction. As a result, various scaling solutions have been consecutively developed and are consistently being improved. Currently, the common scaling solutions are centered around the research and development of Layer0, Layer1, and Layer2. Normally, the capacity expansion schemes applied to different public chains will differ in the light of their development trends. In this report, Gate.io Research mainly analyzes two major capacity expansion technologies, namely State Channels, and Sidechains. It discusses the prospect of Lightning Network and Plasma by comparing the two as well.

Key Takeaways

-The barrier of the capacity expansion technology lies in the difficulty to improve the scalability of blockchain while guaranteeing its security and decentralization at the same time.
-At present, State Channels, Sidechains, and Tenfold Protocol are scaling technologies of Layer2; however, they are still underway to obtain a sufficient balance between security, decentralization, and scalability.
-Lightning Network and Plasma are two scaling solutions of State Channels and Sidechains that are respectively applied to the BTC blockchain and the Ethereum blockchain. Nevertheless, each of them is confronted with limitations while expanding its scalability.
-How to balance the relationship between the scalability and security of the BTC blockchain has become a focal point on the roadmap of Lightning Network’s development. How to achieve a rapid and easy payment channel is one of the significant routes of BTC’s development.
-Plasma requires sophisticated technology to accomplish the security of an off-chain trade without supervision; hence, to combine the scaling solution with other schemes could make a breakthrough at an early date.

The English version will be updated soon

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