What is Ethereum Layer?

Ethereum is a decentralized and open-source blockchain network that uses Ether to cover transaction fees. Ethereum was first introduced by Vitalik Buterin in 2013 and was released on July 30, 2015. Ethereum is currently the 2nd largest after Bitcoin, with a current market capitalization of $402,341 billion. It has taken its place in the crypto world as a cryptocurrency. One of the main reasons for Ethereum’s success is the diverse ecosystem of its decentralized finance. 

The Ethereum network has 2 main functions. The first is that it functions as a platform on which to build on top of hundreds of thousands of other cryptocurrencies. The most common type of these is the ERC-20 network, which makes up a large portion of the best cryptos in the world.

 
Ethereum’s second, and probably most important, function is that it can compute code within the network called “smart contracts .” These are self-fulfilling contracts that require only reliance on the rules, not with other parties in the contract. DeFi platforms use smart contracts to provide users with advanced financial tools for lending, borrowing, earning interest, insurance, and much more. 

Smart contracts can be much more complex than simple transfers or transactions, which increase congestion and transaction fees. The Ethereum blockchain works as a distributed computing network executed by miners. Ethereum miners use their time and computing power to process transactions and generate blocks.

While transaction fees were reasonable before, today users complain about the high gas fees of trading. High fees mean that there is high demand for usage, which leads to network congestion and increased prices for certain users. While this is great for the development of the decentralized economy, increased demand, and the use of applications, high gas charges in a congested and slow network are pushing users away. 

So what is planned to be done for the recovery of the Ethereum network and to reduce user complaints? To mitigate these complaints, Ethereum founders plan to implement Layer 1 and Layer 2. 

Layer 1 is the term used for the underlying blockchain architecture, and the changes made to it are called Layer 1 solutions. For example, Ethereum can be easily scaled by increasing the block size and therefore the number of transactions verified per block. However, this will make mining extremely expensive. Centralizing the network only to the richest miners with the best hardware.

Layer 2 solutions are built on top of the network and do not require any changes to Layer 1. Layer 2 solutions continue to benefit from the security of the consensus mechanism of the Layer 1 network, but they can greatly speed up transactions. While Ethereum’s Layer 1 can process about 15 transactions per second, some Layer 2 projects can increase this to as high as 4,000 transactions per second. Layer 1 scalability upgrades to the Ethereum network are planned in the coming years.

Optimism is a nonprofit Public Benefit Corporation working to launch mainstream network optimistic aggregations. It was born out of a non-profit group called Plasma Group, founded by Ethereum creator Vitalik Buterin and the Lightning Network , co-creator of Bitcoin’s Layer 2 solution. Plasma Group switched to Optimism, a non-profit company, in January 2020 and became a leading optimistic gathering project.

An aggregation is a Layer 2 solution in which a large batch of transactions is collected and processed from the main network (Layer 1) and then condensed transaction data is sent to Layer 1. This can significantly increase the throughput of the network, reduce congestion and reduce transaction fees. Layer 2 projects will probably be the most important step as a pause solution for the scalability of Ethereum and other cryptocurrencies connected to Ethereum. 

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