Tuesday, 31 January 2023

Crypto News

What the Ethereum Merge means for the blockchain’s layer-2 solutions

What the Ethereum Merge means for the blockchain’s layer-2 solutions

Ethereum is just over a week away from officially moving to a proof-of-stake (PoS) blockchain with the Merge slated for completion around Sept. 13–15. With the transition, Ethereum would abandon its current proof-of-work (PoW) chain, eliminating miners from the ecosystem. 

Ethereum is a vast ecosystem with thousands of decentralized applications and decentralized finance protocols working on top of it. Additionally, there are several layer-2 solutions, i.e., solutions built on top of the blockchain itself, the layer 1, to facilitate faster transactions and make Ethereum more scalable.

The Merge would mark the completion of the second phase of the three-phase transition process. The upcoming event will only see the official change of consensus, where the Ethereum blockchain would start processing transactions on the PoS chain. However, there won’t be much impact on scalability or gas fees.

The scalability fixes are meant to arrive after the completion of the third phase, which would introduce sharding, a form of parallel processing that Ethereum founders and developers have claimed would increase Ethereum’s transaction throughput exponentially.

Will layer-2 solutions like Polygon, Arbitrum One, Boba Network and Loopering be viable after the Merge? Cointelegraph got in touch with industry insiders for insight into how these L2 ecosystems will be impacted by the Merge.

Bitfinex chief technology officer Paolo Ardoino believes the Merge won’t have any impact on L2s as the Merge won’t solve the scalability solutions immediately. He told Cointelegraph that even after the completion of the third phase of the Ethereum transition, when it becomes monumentally scalable, L2s will still find a place in the ecosystem. He explained:

“It will be business as usual for L2s. These solutions still have key value for short, medium and long-term scalability. L2s will still be needed to fulfill the growing demand and usage of blockchains across the globe. Even 100,000 transactions per second would not be sufficient to meet true global demand and adoption.”

Anton Gulin, global business director at AAX Exchange, told Cointelegraph that L2s wouldn’t face many issues or see a need for great technical changes as the translation is two years in the making, so L2 chains are already prepared. 

“The more significant point is how successful the Merge would be and whether it can meet the momentum. With the more significant investments flowing into space, we can expect…

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