With Ethereum transaction fees still high, more layer-two powered platforms are emerging.
The number of decentralized exchanges running layer-two solutions is growing as the Ethereum network struggles to keep up with its own popularity.
As excessive Ethereum gas prices continue to hamper smaller transactions and operations on the network, the number of faster and cheaper options continues to expand as layer-two adoption increases. Layer-two solutions have the potential to process thousands of transactions per second, rather than the handful processed on layer-one.
The LeverJ decentralized exchange has seen a surge in trading volumes since it launched perpetual contracts four weeks ago. Around $75 million has been traded across 26,600 transactions, costing just under $600 in total gas fees. Industry observer ‘DeFi Dad’ commented;
“Only in DeFi 2021 could you miss these monster numbers trading on an Ethereum DEX—built on L2“
Although these figures may seem small compared to DeFi giants such as Uniswap, they represent a surge in layer-two adoption at a time when the technology is most needed. Essentially, layer-two scaling involves taking work off the root chain in order to process data and transactions faster and more cost effectively.
DeFi protocol Synthetix is also poised to launch its Optimism layer-two staking upgrade called Castor later today, Jan. 14, at 23:00 UTC.
Unfortunately we've had to delay the Castor release by ~22 hours, and it will now be deployed at 23:00 UTC on Thursday, January 14. https://t.co/nlbgvZ99pI
— Synthetix ⚔️ (@synthetix_io) January 13, 2021
Castor is the result of four months of testing which began in late September by offering incentives in its native SNX token to participants of the testnet.
The DeFi protocol, which offers synthetic assets tracking the value of real-world assets, is migrating to a new SNX escrow contract that supports L2. The upgrade also includes two smart contracts enabling deposits on layer-one and withdrawals on layer-two using optimistic rollups.
The developers expect that putting staking on layer-two will improve the user experience with faster transaction processing and cheaper gas costs. With its complicated smart contracts, minting, staking and claiming weekly rewards has sometimes cost more than $100 per transaction, which will now be a thing of the past.
According to the Synthetix dashboard, market capitalization has reached $3.2 billion while SNX prices have surged 26% over the past seven days to reach an all-time high of $16.
Decentralized exchange Loopring is also gaining traction with new updates and layer-two liquidity mining incentives for its native token, LRC.
Its latest feature is the ability to send from a Loopring L2 account to any Ethereum based L1 account without the recipient ever needing to be on L2.
“This means you can send a fast, cheap (gas-free) payment on L2 to your friend that has never even heard of L2, all you need is their Ethereum address (or ENS name),”
The number of layer-two based networks and exchanges are increasing but the big question remains when will the most popular DEX, Uniswap, launch its L2 upgrade?
Average Ethereum transaction prices have retreated a little from their record high of more than $16 on January 11, but they are still economically unviable for many users at over $5 according to bitinfocharts.com.