The leading cryptocurrency exchange, Coinbase, has introduced a Layer-2 scaling solution for Ethereum. The new technology offers fast and cheap Ethereum transactions from the wallets.
The announcement revealed the exchange was integrating with Optimism’s Optimistic Rollup Testnet. The Coinbase turbocharged Ethereum would not be available on the exchanger itself. Instead, it will be on the non-custodial wallet and dApp browser. It will allow users to view balances and transact on the Optimistic network.
The crypto exchange reiterated its commitment to support Ethereum scaling through a tweet. They confirmed the integration of the native support for the Testnet. This they claimed would offer fast, scalable dApp and low fee wallet transactions.
The layer 2 scaling involves the removal of some on-chain computation from the mainnet. This allows space for more transactions hence faster completion. The main network is layer 1. The browser and custodial wallets are layer 2 as they are off-chain.
The developers at Plasma Group are responsible for layer 2 development. They announced the launch of the Ethereum testnet in late September. They had by then developed a featured Ethereum Virtual Machine (EVM). The machine would help in the execution of the layer 2 systems.
The Need for Coinbase Turbocharge Ethereum Layer 2 Solution
The main reason for the Coinbase turbocharge Ethereum solution is to reduce congestion. This financial year has been active for the crypto economy. Several entities are picking up digital currencies more than ever.
The move to digital currencies is due to the challenges of the fiat currency. Covid-19 has made the traditional stocks a little sluggish.Virtual currencies are now leading alternatives.
Ethereum has had a very active year. It provides an operating platform for the other cryptocurrencies. While it was also growing in uses, the other assets were also becoming rampant. This was particularly observable with the rise of decentralized finances (DeFi).
The Defi boom saw an acute rise of the assets within a short period. Defi coins gained tract as the market capitalization rose more than ten times. This kept on for long as the coins became useful in the financial system.
As a supporting protocol for the Defi, Ethereum became so congested. Transactions in the platform become slower. The Ethereum miners had a lot to do in verifying transactions.
As the speeds slowed, the transaction costs went higher. High demand and less supply would affect any platform. Only the miners might have gained in the process. The Ethereum miners, at one point, made more income than the Bitcoin counterparts.
Such inconvenience for users is not productive for the platform. Most people use cryptos due to faster transactions and low transaction fees. With Ethereum headed the opposite, clients were to start looking for options.
The Coinbase turbocharge Ethereum layer 2 solution could not come at a better time.
There were cases in September when gas prices shot to double digits. This happened as the Defi farmers flocked the latest incentives providing yields.
The average transaction costs in Ethereum have gone down in recent times. It is currently at around 2USD. However, there is a need for even lower costs. It is the only way to sustainable crypto growth. The new Coinbase turbocharged Ethereum layer would help in achieving it.
Other Crypto Exchanges Moving to Layer 2
Coinbase turbocharged Ethereum layer is not unique to the crypto exchange. It is the second exchange after Bitfinex to announce shifting to off-chain. Bitfinex is integrating with OMG’s More Viable Plasma off-chain solution.
Some of the first entities to have taken up the scaling earlier include Synthetix. It integrated with Optimistic in May. It has also announced a move to phase 2 of the integration. This will see it move all transactions to layer 2 in the long run.
Matter Labs has also been part of the scalability race. It released a layer smart contracts testnet run on the zkSync technology. It then had the Curve finance, one of the top Defi, as its first dApp.
QuickSwap and Aztec are also part of the changes. QuickSwap, A DEX on the Ethereum, operates on the Matic Network’s Layer 2. The new network works as an adapted version of Plasma and other side chains. Aztec yet launched a new version. The Aztec 2.0 is operating on Ropsten as a zkRollup-based layer 2 network.
Several other crypto exchanges are likely to follow the Coinbase trend. Every cryptocurrency wants faster transactions for the users. That is why most are joining the Layer 2 friendly exchanges. The competition for layer 2 networks is likely to become hot. The different solutions will be looking to work with several exchanges.
Understanding Crypto Exchange Evolution
Coinbase turbocharged Ethereum layer solution is not an accident. It is also not a knee-jerk reaction to contain the expanding crypto market. Instead, it is part of the ever-evolving crypto exchange culture. It is only that the Defi boom might have hastened the move.
The rypto exchangecs are ever on the lookout for how to improve user experience. They started as decentralized entities without any controlling authority. Launching a crypto exchange used to be easy, with no elaborate documentation.
While the exchanges became popular, customer risks increased. Several investors lost money to frauds and scams. The government had to come in for consumer protection. They now have an elaborate process before authorization to practice.
The exchanges must provide documentation and follow the anti-money laundering regulations. They also must provide a whitepaper before the launch.
The exchanges are also investing in newer customer-centric developments. Other than the Coinbase turbocharge Ethereum layer, the exchange allows instant money withdrawal. It allows users to withdraw fiat currency within the shortest duration.
The new development is the first in the crypto world. It takes long for money to reach the bank account after the withdrawal. In some cases, it lasts up to five business days.
If the competition exists, Coinbase will keep launching better solutions. That is what keeps it as a leading crypto exchange.
The need for faster and cheaper transactions overrides everything in the crypto world. Coinbase turbocharged Ethereum layer seeks to provide the best solution. It will reduce congestion on layer 1 for more transactions. The faster the transactions, the more affordable the costs.