How Do Ethereum Scaling Solutions Work?
Ethereum scaling solutions aim to improve the network's transaction throughput and reduce costs, addressing its limitations during peak usage. These solutions can be divided into two main categories: Layer 1 and Layer 2.
Layer 1 Solutions
Layer 1 scaling involves modifying the Ethereum protocol itself. This includes upgrades such as Ethereum 2.0, which transitions the network from a Proof-of-Work to a Proof-of-Stake consensus mechanism. This change enhances security and scalability, enabling more transactions per second (TPS) while reducing energy consumption.
Layer 2 Solutions
Layer 2 solutions operate on top of the Ethereum blockchain, alleviating congestion without altering the base layer. Popular Layer 2 solutions include:
- State Channels: Enable off-chain transactions that are only recorded on-chain once finalized.
- Plasma: Creates smaller child chains for transactions, processing many off-chain before finalizing on the main Ethereum chain.
- Rollups: Batch multiple transactions and submit them as a single transaction, improving efficiency and reducing fees.
By employing these technologies, Ethereum aims to scale seamlessly while maintaining decentralization and security, facilitating more widespread adoption and use of decentralized applications (dApps).