Decentralized Finance (DeFi) projects appear to be reaching a consensus of sorts on what second layer scaling technology to employ.
Mike McDonald of Balancer, a defi dapp that holds more than $300 million worth of assets, says:
“I believe the layer 2 solution that ultimately wins in Defi will be the one that can scale slowly in parallel with L1 without breaking fungibility in liquidity.
Optimistic style roll ups require an ‘all at once’ style migration to be successful, otherwise projects and liquidity all gets fractured between L1 and L2 due to withdrawal periods. Any L2 tech is too experimental to support billions in the short term.
In my opinion the biggest mistake any protocol with pooled liquidity can make is launching two separate apps on L1 and L2 without a near synchronous connection between the liquidity.
Another potential mistake is being the first to move entirely onto a L2 and isolating yourself from the composability and existing liquidity on L1.
Zk rollups are the most promising (and the only scaling path Balancer is exploring internally at the moment). That being said, there’s still a massive amount of time and development needed to go from a L2 demo app to a coexistent L2 with meaningful $ locked.”
Optimistic rollups have a withdrawal delay of one to two weeks during which time a transaction can be challenged by providing fraud proofs.
Zk tech compresses a batch of say 8,000 transactions and turns it into one on-chain proof, meaning you can be sure all those 8,000 transactions are valid.
The only difference here from the current UX is that you have to enter the zk system and exit, but this can occur somewhat instantly by the block.
Apparently now they’re zk-ing smart contracts too with StarkWare, a dev studio that has been working on zk tech for the past two years, stating:
“Cairo is the first production-grade platform for generating STARK proofs for general computat...