Layer-2 Solutions in 2024: Top 10 Promising Projects Shaping the Future of Blockchain

Scalability Issues - The Bottleneck of Blockchain Today

Since Bitcoin (BTC, which was invented in 2008, is currently trading at $88.59K, up 1.18% in 24 hours), blockchain technology has become the foundation for a comprehensive digital ecosystem. From DeFi, GameFi, NFTs, to metaverse and Web3, blockchain applications are increasingly diverse. However, a major challenge still exists: scalability.

Ethereum (ETH, currently at $2.97K, up 1.41%), as the leading Layer-1 platform, can only process about 15 transactions per second (TPS) since 2023. Bitcoin also only reaches 7 TPS. In comparison, Visa can handle up to 1,700 TPS, highlighting a significant gap between blockchain and traditional financial systems. This is what drives the emergence of Layer-2 solutions.

What Is Layer-2? How Does It Work?

Layer-2 is a set of scaling protocols built on top of Layer-1 blockchain platforms. They operate like highways running parallel to the main blockchain, processing transactions off-chain (off-chain) and then consolidating the results back onto the main blockchain. This approach helps to:

• Significantly reduce network congestion
• Cut transaction fees (gas fees)
• Increase throughput (TPS)
• Maintain the security of the underlying blockchain

The operating principle is very simple: instead of all transactions needing confirmation on Layer-1, Layer-2 handles thousands of off-chain transactions, then summarizes them into a single transaction recorded on the main blockchain.

Types of Layer-2 Solutions

Optimistic Rollups: Trust by Default

This type assumes all transactions are valid until proven otherwise. It offers fast confirmation speeds, low costs, but has a “challenge” period during which users must wait to withdraw funds to Layer-1. Projects like Arbitrum and Optimism use this method.

Zero-Knowledge (ZK) Rollups: Absolute Security

These solutions bundle transactions into a single cryptographic proof, without revealing transaction details. Confirmation is faster because there’s no challenge period, but computational complexity is higher. Polygon, Manta Network, Coti, and Starknet all utilize this technology.

Other Solutions

• Plasma Chains: Specialized sidechains suitable for specific applications
• Validium: Combines security and efficiency, e.g., Immutable X

Top 10 Prominent Layer-2 Projects in 2024

1. Arbitrum - Market Leader

Technology: Optimistic Rollup
Throughput: 2,000-4,000 TPS
TVL: $10.7 billion
Token: ARB (currently $0.19, up 2.14%)

Arbitrum accounts for over 51% of Ethereum Layer-2 TVL as of January 2024. It processes transactions 10 times faster than Ethereum and reduces gas fees by 95%. Its ecosystem includes hundreds of DeFi dApps, NFT marketplaces, and gaming platforms. Strong community support and a talented development team help the project continuously evolve.

2. Optimism - Main Competitor

Technology: Optimistic Rollup
Throughput: 2,000-4,000 TPS
TVL: $5.5 billion
Token: OP (currently $0.27, up 2.45%)

Optimism offers Ethereum security without the scalability issues. It processes transactions 26 times faster than Ethereum and reduces gas fees by 90%. The project focuses on decentralization and has built a vibrant DeFi ecosystem with protocols like Aave, SushiSwap.

3. Lightning Network - Bitcoin Solution

Technology: Bi-directional Payment Channel
Throughput: Up to 1 million TPS
TVL: $198 million+

Lightning Network enables instant Bitcoin transactions off-chain with near-zero fees. It’s ideal for daily microtransactions and real-time applications. Despite many technical challenges, its adoption rate is increasing rapidly.

4. Polygon - Multi-Technology, Multi-Solution

Technology: Hybrid (Sidechain, zkRollup, PoS)
Throughput: 65,000 TPS
TVL: $4 billion
Token: MATIC

Polygon is a comprehensive Layer-2 ecosystem offering multiple solutions for Ethereum. Its throughput of 65,000 TPS surpasses most competitors. It has become a preferred choice for DeFi projects, NFT marketplaces, and blockchain applications due to low fees and high speed.

5. Base - Coinbase’s Layer-2

Technology: Optimistic Rollup (OP Stack)
Throughput: 2,000 TPS
TVL: $729 million

Base, built by Coinbase, aims to enhance Ethereum’s capabilities. It targets 2,000 TPS, reduces gas costs by 95%, and confirms transactions almost instantly. Backed by Coinbase, Base benefits from strong security expertise and a large user base.

6. Dymension - Modular Blockchain

Technology: RollApps (Integrated Rollups)
Throughput: 20,000 TPS
TVL: 10.42 million DYM

Dymension is the first Layer-2 in the Cosmos ecosystem, separating functions like consensus, execution, and data availability. Developers can create custom RollApps optimized for specific needs. Its modular design allows independent scaling without affecting the entire network.

7. Coti - Transitioning to Ethereum

Technology: ZK Rollup
Throughput: 100,000 TPS
TVL: $28.98 million
Token: COTI (currently $0.02, up 0.88%)

Initially a solution for Cardano, Coti is transitioning into a privacy-focused Layer-2 network for Ethereum. This shift will enable faster, cheaper transactions with Ethereum-level security. The garbled circuits technology will continue to protect transaction privacy.

( 8. Manta Network - Privacy on Ethereum

Technology: ZK Rollup
Throughput: 4,000 TPS
TVL: $951 million
Token: MANTA )currently $0.07, +0.02%###

Manta Network consists of two modules: Manta Pacific (EVM-compatible Layer-2) and Manta Atlantic (privacy identity management). Zero-knowledge cryptography is core, ensuring valid transactions without revealing privacy. The project quickly gained popularity, becoming Ethereum’s third-largest Layer-2 by TVL.

( 9. Starknet - STARK Technology

Technology: ZK Rollup )STARK proofs###
Throughput: 2,000-4,000 TPS (theoretically millions)
TVL: $164 million

Starknet uses STARK proofs to verify off-chain transactions. It aims to be a fully decentralized network operated by the community. Its familiar Cairo language makes it accessible for developers. Although its user base is smaller compared to established L2s, its ecosystem is growing rapidly.

( 10. Immutable X )IMX### - Focused on Gaming

Technology: Validium
Throughput: 9,000 TPS+
TVL: $169 million
Token: IMX (currently $0.24, up 0.33%)

Immutable X is designed specifically for gaming, offering scalability, low costs, and security. With over 4,000 TPS, it enables near-instant transactions. The project supports creating, trading, and transferring NFTs efficiently, with notable TVL and market share among Ethereum Layer-2 solutions.

Ethereum 2.0 and the Future of Layer-2

Ethereum 2.0 is bringing significant changes. The Proto-Danksharding phase is expected to increase Ethereum’s throughput to 100,000 TPS. This does not make Layer-2 obsolete but:

• Enhances Layer-2 performance: Danksharding optimizes Layer-2 solutions for ultra-low-cost options
• Reduces transaction fees: Proto-Danksharding cuts costs on Layer-2, opening doors for everyone from professional traders to newcomers
• Seamless integration: Improves Ethereum’s support for rollups, providing a smooth user experience
• Better experience: Faster confirmations, less congestion, ultra-low gas fees

Layer-2 and Ethereum 2.0 will form a symbiotic relationship, jointly building an efficient and infinitely scalable blockchain.

Practical Applications of Layer-2

( Efficient DeFi Traders benefit from ultra-low costs in yield farming, margin trading, and exchanges, directly increasing profits.

) Gaming and NFTs High-throughput Layer-2 solutions enable creating and trading NFTs without worrying about high fees. Blockchain games can offer smooth experiences.

Daily Payments

Lightning Network and other Layer-2s turn Bitcoin and Ethereum into practical payment tools for everyday transactions.

Conclusion

2024 is a pivotal year for blockchain Layer-2. These protocols not only address scalability issues but also pave the way for widespread blockchain adoption. With high throughput, low fees, and robust security, the best layer 2 crypto coins are shaping the future of decentralized finance and Web3.

From Arbitrum leading the market, Optimism with a strong community, to specialized solutions like Immutable X for gaming, each project plays a vital role in the blockchain ecosystem. The future belongs not only to Layer-1 but to the collaboration between Layer-1 and Layer-2 to deliver the best user experience.