Research on Layer 2 and Optimistic Track

Exploring Layer 2 and Optimistic Approaches A Research Study

Source: Guatian Lab

Opening

In the previous article “Guatian Academy GameFi Public Chain Research Series Part 1 – Ethereum’s Development and Upgrade Path”, we introduced the development history of Ethereum and the basic information of Ethereum 2.0 upgrade. This led to two main segments of Layer2: Optimistic Rollup and ZK Rollup. If Ethereum is compared to a company, we can understand that Ethereum 2.0 upgrade is a reconstruction of the internal management structure of the company. It has transformed from the original chain structure to a structure of beacon chain and shards. Layer2 is further outsourcing the tasks that need to be executed on this structure to further reduce the company’s burden, improve efficiency, and enhance overall task processing capabilities.

In the second research article of this series, we will further explore Layer2 solutions and delve into the Optimistic Rollup segment.

Overview of Layer2 Solutions

To understand Layer2 scaling solutions, we first need to confirm the concept of Layer2.

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What is Layer2? Layer 2 refers to off-chain networks, systems, or technologies based on the underlying blockchain (Layer 1) to scale the underlying blockchain network. Currently, there are two classifications for Layer2 methods. In the narrower sense, Layer2 needs to inherit the security of the Ethereum chain and conduct transactions bundling with Layer2 Ethereum. ZK Rollup and Optimistic Rollup are orthodox Layer2 solutions. In the broader sense, Layer2 includes all Ethereum scaling solutions, mainly including the following five types:

1) Sidechains: Sidechains are independent blockchains that operate in parallel with Ethereum. They lock a certain amount of assets in the main chain’s smart contracts and then mint the same amount of assets on the sidechain, achieving the so-called “atomic swap.” The biggest issue with sidechain solutions is weak security, but they have good independence and flexibility. Polygon is a well-known representative of Ethereum sidechains. Some people consider BNB Chain as an Ethereum sidechain. Although BNB is also an EVM-compatible chain, it can operate independently of Ethereum, so we currently do not classify it as a sidechain.

2) State Channels: State channels enable off-chain transactions by establishing dedicated payment channels and multi-signature addresses among traders. Only when settlement is needed, the final calculation result will be recorded on the chain. They have the characteristics of fast speed and low fees. Representative technologies include the Lightning Network (based on Bitcoin) and the Raiden Network (based on Ethereum).

3) Rollups: Rollups have been discussed in previous articles. They “outsource” data execution to Layer2 and batch submit it to the main chain. They are mainly divided into Optimistic Rollup and ZK Rollup. Optimistic Rollup takes an optimistic approach to the validity of data. If no one questions the data within a specified time and submits fraudulent proofs, the data is considered true and accurate. Otherwise, fraudulent processing mechanisms are activated to reverse or withdraw transactions. ZK Rollup packs multiple transactions together and publishes them on L1 while publishing a proof (using zero-knowledge proofs) to claim the validity of these transactions.

4) Validium: Validium also uses zero-knowledge proofs, but unlike ZK Rollup, it only uploads state roots and zero-knowledge proofs to the mainnet, while transaction data is stored on Layer2. This allows for higher throughput but sacrifices some security. Because both use zero-knowledge proofs, many people consider Validium to be a variant of ZK Rollup. So another way to classify them is to divide ZK and optimistic into two categories and classify Validium under ZK. ImmutableX, a gaming chain, primarily utilizes the underlying technology of Validium.

5) Plasma: Plasma is an Ethereum Layer2 scaling framework, also known as “chain within a chain.” It locks assets on the main chain and transfers transactions to the child chain for processing, periodically submitting state updates to the main chain. This enables fast settlements and significantly reduces transaction fees at a large scale. The difference between child chains and side chains is that child chains use root storage, allowing users to safely exit the Plasma chain in case of any errors, whereas side chains do not have this feature. In general, the correlation between child chains and the main chain is higher.

In this article, we will focus on discussing the sidechain solution Polygon PoS, the two main projects of Optimistic Rollup – Arbitrum and Optimism, as well as opBNB and COMBO, which are both Ethereum testnets and Optimistic Rollup projects. We will mainly explain the basic technical principles, ecosystem, and their support for blockchain games. We will cover ZK Rollup and Validium in the third article.

Analysis of Polygon PoS

Introduction to Polygon

Polygon, formerly known as Matic, was initially a blockchain scalability platform and was referred to as the “blockchain internet of Ethereum.” With the continuous development of the ecosystem, the platform expanded from a single Layer2 solution to a “Network of Networks,” aiming to address Ethereum’s mainnet transaction speed and scalability issues, primarily focusing on blockchain games and NFTs. Categorizing Polygon as a sidechain is not entirely accurate because within Polygon’s overall product matrix, the sidechain product Polygon PoS serves as the foundation, while the ZK Rollup matrix consisting of Polygon zkEVM, Polygon Miden, Polygon Zero, and Polygon Nightfall is the potential growth point for Polygon. In the Polygon 2.0 upgrade plan released this year, the team is preparing to upgrade the entire Polygon PoS to zkEVM Validium. Due to space limitations and topic classification, in this article, we will primarily analyze the sidechain product Polygon PoS, and the ZK part will be further explained in the next article.

Technology

Although Polygon PoS is based on Ethereum, it benefits from faster speed and higher scalability, with transaction volume consistently exceeding double that of the Ethereum mainnet (approximately 2 million daily transactions) and gas fees being only 0.1% of Ethereum’s.

Polygon PoS is an EVM (Ethereum Virtual Machine) compatible sidechain that was launched on June 1, 2020 and is currently Polygon’s main business. Polygon PoS is also the most mature Ethereum sidechain solution to date and can be divided into three layers:

1) Ethereum layer: This layer consists of a series of Ethereum smart contracts that are responsible for handling processes on Ethereum. By utilizing Ethereum as an endpoint, it can effectively leverage Ethereum’s security as a shield. Additionally, the Matic token is also staked in this layer.

2) PoS Checkpoint layer: This layer is the core layer of Polygon and is responsible for producing and verifying Matic sidechain blocks. PoS nodes can listen to events on the Ethereum chain, pass on the information to the Matic sidechain, and regularly publish Matic-generated blocks to the Ethereum chain to achieve information synchronization between the Matic sidechain and the Ethereum mainnet.

3) Matic sidechain layer: This layer is responsible for transactions, shuffling, block formation, and regularly publishing checkpoints to the node layer.

Polygon’s unique hybrid structure allows Polygon PoS to support the Plasma framework and inherit Ethereum’s security. The PoS Bridge further ensures the security of the chain by using the same set of validators and staked MATIC tokens.

Ecosystem

Since its launch in 2020, Polygon has entered an explosive phase in Q2 of 2021 and has become the third public chain with a complete ecosystem after Ethereum and BNB. By the first quarter of 2023, the number of projects in the Polygon ecosystem has exceeded 53,000.

Benefiting from the early stage of platform development during the flourishing period of DeFi, DeFi projects expanded rapidly on Polygon. For example, leading DeFi projects such as Uniswap, Aave, and Curve chose Polygon as their first deployment choice for multi-chain expansion. In April 2021, Polygon launched a $1.5 million DeFi development fund to reward projects in Matic. However, the DeFi projects in the Polygon ecosystem also have some shortcomings in terms of innovation. Its total value locked (TVL) on the chain ranks fifth overall and has been surpassed by the new comer Arbitrum.

Polygon also has a unique perspective on NFTs. In June 2021, Opensea first supported the Polygon chain, and since then Ethereum and Polygon have each taken different paths in the high-end and low-end markets of NFTs. Many international brands have already launched their own NFTs on Polygon, including Starbucks, Mastercard, Adidas, and more. These leading companies have gradually attracted more brands to join, creating a positive cycle. Other popular projects on Polygon include Lama Kings, Doodle Changs, y00ts, Bungo Beanz, and Super Pengs, among others.

In terms of gaming and metaverse, according to data from Footprint, the number of active gaming projects on the Polygon chain has reached 468, ranking third only after BNB and Ethereum. Specifically, two leading metaverse projects, Decentraland and The Sandbox, were deployed on the Polygon chain as early as April and June 2021, respectively. Other popular games include Pixels, Arc8, Benji Bananas, Sunflower Land, and Skyweaver.

In July 2021, Polygon announced the establishment of Polygon Studios, focusing on investments in the NFT, Gaming, and Metaverse sectors. In terms of offline promotion, Polygon has also been frequently involved. With its low-cost and fast transaction experience, Polygon has become one of the best choices for Web2 and traditional enterprises looking to explore blockchain or web3.

Summary of Pros and Cons

Polygon PoS, as the most mature Ethereum Layer 2 ecosystem, has a strong first-mover advantage, and its advantages are also very obvious:

l Speed: Intuitive and efficient bridging, deposits, and withdrawals, with a transaction speed of up to 7000 tps, far surpassing the performance before the upgrade of Ethereum (15 tps);

l Security: Relies on Ethereum and shares its security;

l Compatibility: Full EVM compatibility means that smart contracts can be deployed directly on the Polygon chain;

l Low cost: About 0.1% of Ethereum

The low transaction fees and fast speed make Polygon the best choice for high-frequency trading projects (Defi, GameFi, etc.) within the Ethereum ecosystem. Although the rise of Layer 2 star projects such as Arbitrum, Optimism, and zkSync may to some extent affect the market pattern of Polygon, Polygon itself is also constantly evolving and embracing the ZK track in all aspects, acquiring and launching a series of products based on ZK technology. We will analyze this in detail in the next article.

Polygon PoS entered the market at the right time. In 2020, it was the point when the Ethereum network was severely congested and scalability issues were prominent. The market urgently needed a phenomenal product in the Ethereum ecosystem to improve its performance. At that time, the Rollup track and the Ethereum 2.0 upgrade were still in the development process, and the main competitors in the Layer 2 market had not yet formed a strong threat. In addition, Polygon’s market promotion strategy has also been very effective. In the early stages of development, it relied on DeFi and adopted a subsidy-led strategy, expanding Aave, Curve, Uniswap, Quickswap, and other giants; in the gaming and metaverse track, it adopted an investment + incubation strategy for extensive layout, bringing in a certain number of high-quality projects; in terms of ecosystem integration, it deepened cooperation with platforms and public chains such as ImmutableX and shared the traffic dividends of these platforms. With the further improvement of the Polygon ecosystem and the gradual maturity of the Polygon ZK ecosystem, we believe that Polygon will experience another significant growth and continue to consolidate its position in the top tier of public chains.

Arbitrum Project Analysis

Introduction to Arbitrum

Arbitrum, as a leading Layer2 project, has always been shrouded in glory. Especially during the coin issuance period in the first half of 2023, it became one of the hottest topics in the blockchain community. Everyone was clamoring to join the Layer2 ecosystem. According to our statistics at Defillama, Arbitrum has surpassed many competitors in terms of total value locked (TVL). It ranks fourth after ETH, BSC, and TRON, and even surpasses the well-established Layer2 sidechain Polygon. Arbitrum has established itself as the undisputed king of Layer2.

Arbitrum went live in May 2021: Arbitrum One was officially launched on the Ethereum mainnet. In October 2021, Arbitrum Nova’s public testnet was launched. In 2022, the plan for Arbitrum Orbit is steadily progressing. It is designed as a Layer 2 solution specifically for NFTs and virtual reality (VR) applications. This will provide more scalability for digital assets and applications in the virtual world.

Arbitrum currently has a TVL of $5.93 billion, a circulating market cap of $1.45 billion, and a fully diluted valuation of $11.3 billion with no new unlocks in the next 6 months. It currently has around 150,000 daily active addresses and around 620,000 transfers, keeping pace with Polygon and firmly sitting in the top tier.

Technology

Arbitrum is a Layer 2 scalability solution that follows a similar technical roadmap as Optimistic Rollup. It assumes that all transaction verifications are honest but sets a challenge period during which anyone can raise a challenge. The system introduces two different roles to ensure transaction processing: Verifiers and Aggregators. Verifiers are responsible for processing transactions and receive Ether as a reward, while Aggregators monitor whether Verifiers are correctly executing transactions. Before a transaction returns to the Ethereum mainnet, there is a 7-day challenge period during which all Aggregators can raise challenges. If it is confirmed that there is an issue with the transaction, the malicious actor will lose the staked tokens. This way, as long as there is at least one honest Aggregator during the challenge period, the security of Arbitrum can be ensured.

The project mainly includes the following major product lines:

1) Arbitrum One: Based on Optimistic Rollup technology, Arbitrum One achieves high-performance and low-cost smart contract execution by verifying transactions on the Ethereum chain. Arbitrum One provides a fast and cost-effective way to execute Ethereum smart contracts, alleviating network congestion issues and enhancing the performance of DeFi applications and the NFT market. Most applications (DeFi and NFT, etc.) are deployed on the flagship rollup platform, Arbitrum One.

2) Arbitrum Nova: Arbitrum Nova adopts zk-Rollup technology to verify transactions with zero knowledge proofs, improving security and efficiency. The introduction of Arbitrum Nova adds diversity to Arbitrum, allowing developers to choose different solutions to build applications that meet the needs of different projects. Arbitrum Nova is primarily used for high-throughput applications, such as gaming social applications.

3) Arbitrum Orbit: Arbitrum Orbit is Arbitrum’s ecosystem development plan aimed at providing tools, libraries, and support to facilitate the development of applications on Arbitrum. The goal of Arbitrum Orbit is to expand the Arbitrum ecosystem, providing resources and support to developers to promote the construction and deployment of applications.

These three components together drive the development of Arbitrum, providing more technical choices and ecosystem support, attracting more developers and projects, and further promoting the growth of the Ethereum ecosystem.

Ecosystem

The Arbitrum ecosystem project has reached 600, with numerous excellent ecosystem projects such as GMX, Radiant, TreasureDAO, Camelot, etc., bringing a large number of use cases to Arbitrum. Among them, game projects like Treasure DAO and Pirate Nation have experienced explosive growth, bringing tremendous activity to Arbitrum.

Summary of Pros and Cons

Arbitrum inherits the advantages of Optimistic Rollup and has the following advantages:

l High performance: Arbitrum improves transaction throughput, reduces costs, and alleviates Ethereum network congestion issues by optimizing smart contract execution.

l Low cost: As transactions are executed on Layer 2, Arbitrum significantly reduces Gas fees on the Ethereum main chain, reducing the cost of user participation in activities such as DeFi and NFT markets.

l Compatibility: Arbitrum is compatible with Ethereum smart contracts, supporting the migration of existing dApps and smart contracts.

l Security: Arbitrum adopts Layer 2 extension security measures, such as Rollup technology, to ensure the security of user funds and data.

l Ecosystem support: It attracts well-known projects within the Ethereum ecosystem, providing users with more choices while providing growth opportunities for DeFi and NFT projects.

Arbitrum has the following disadvantages:

l Centralization: Compared to the Ethereum main chain, Layer 2 solutions typically have a higher degree of centralization, which may raise some security and trust issues.

l New learning curve: New users may need to learn new workflows and methods, adding some learning curve for users. For example, transferring ETH mainnet assets to the Arbitrum Layer 2 network via bridging.

l Low network effect: It takes time to build sufficient network effects to attract more users and developers.

Overall, Arbitrum has significant advantages in providing high performance, low cost, and compatibility, but still needs to address some challenges of centralization and network effects. In the future, with further development and adoption of Layer 2 technology, Arbitrum is expected to improve the scalability and user experience of the Ethereum ecosystem.

Optimism Project Analysis

Introduction to Optimism

Optimism is an Ethereum Layer 2 solution that moves transfers, smart contracts, and more to the Optimism chain for processing, only recording the final results on the Ethereum blockchain. This greatly reduces transaction fees.

The Optimism project was launched in early 2020 with the release of a whitepaper and introduced a testnet at the end of 2020 to validate the feasibility and security of its technology. On the testnet, developers and projects can begin deploying smart contracts and applications on Optimistic Ethereum. In 2021, Optimism actively started collaborating with the Ethereum community to promote the development of Layer 2 solutions. The Ethereum community recognizes the urgent need for scalability, and Optimism provides a viable option. The Optimism mainnet was launched at the end of 2021, marking the introduction of the first legitimate Layer 2 scaling solution on Ethereum. Since then, several DeFi projects and decentralized exchanges have started migrating to Optimistic Ethereum to reduce transaction costs and improve performance. Since its mainnet launch, Optimism has gained widespread adoption and attracted many projects to deploy applications, including DeFi projects, NFT markets, and other Ethereum ecosystem applications.

The development of Optimism showcases its important role in addressing Ethereum network congestion and high transaction fees, as well as its continuous growth and adoption within the Ethereum ecosystem. It represents a significant advancement of Layer 2 scaling technology in the blockchain field.

Technology

When talking about the technology behind Optimism, the OP Stack must be mentioned. The OP Stack can be understood as a set of open-source software components that allow anyone to build their own L2 blockchain on Ethereum using Optimistic Rollup. The OP Stack consists of four main components:

– Mainnet: The OP mainnet is a low-cost and fast Ethereum L2 network that is compatible with the Ethereum Virtual Machine (EVM).

– Contracts: These are the smart contracts that implement the core logic and functionality of the OP Stack. The OP contracts include the State Transition System (STS), Fraud Proofs (FP), State Commitment Chain (SCC), and Canonical Transaction Chain (CTC).

– Services: These provide data availability, synchronization, and communication between L1 and L2.

– Tools: These are tools that facilitate the development, testing, deployment, monitoring, and debugging of blockchain based on the OP Stack.

The OP Stack is being built as a forkable, modular, and scalable blockchain infrastructure. To achieve this vision, all types of L2 need to be integrated into a single Superchain, combining separate L2s into an interoperable system. Deploying L2 will be as simple as deploying smart contracts on Ethereum today, transforming the narrative from “one-click token issuance” to “one-click chain issuance”. Essentially, a Superchain is a horizontally scalable blockchain network that shares Ethereum’s security, communication layer, and development tools. It can be compared to Cosmos, which is based on Ethereum’s security, but now OP Stack has become the Cosmos Killer. Thanks to the OP Stack or Superchain architecture, Optimism, Base, Zora, Aevo, and Public Goods Network have already launched, and opBNB has recently gone live as well.

Architecturally, the OP Stack can be divided into six layers from bottom to top: DA Layer for data availability, Sequencing Layer, Derivation Layer, Execution Layer, Settlement Layer, and Governance Layer. Each layer of the OP Stack is a modular API that can be combined and decoupled as desired. The most crucial layers are the DA layer, Execution layer, and Settlement layer, as they form the main workflow of the OP Stack.

1) DA Layer: The data availability layer is the original data source of the OP Stack. It can use one or multiple data availability modules to obtain input data. Currently, the most significant DA layer is Ethereum, but there will be more chains in the future.

2) Execution Layer: The execution layer in the OP Stack provides a state structure for the EVM or other VMs, enabling support for L2 transactions initiated on Ethereum. It also adds additional L1 data costs for each transaction in the overall cost of publishing transactions to Ethereum.

3) Settlement Layer: This layer aggregates L2 transaction data on the OP Stack and sends the information to the target chain for settlement after L2 confirmation. In the future, it is also expected to have access to ZK and other validity proof mechanisms to bridge the gap between different chains and even connect OP system L2 and ZK system L2.

Ecosystem

DeFi is always the highlight of public chains, and the prosperity and innovation of DeFi projects attract and accommodate a large amount of liquidity, just like injecting fuel into the engine, activating the entire public chain ecosystem. OP’s DeFi ecosystem is relatively complete, with decentralized exchanges, lending platforms, and more. For example, Velodrome is the largest DEX on OP, and Sonne Finance is OP’s native lending platform, ranking second in TVL among lending projects.

In the GameFi field, unfortunately, OP doesn’t have any remarkable projects. It lacks a “console-like” project like Tresure DAO or innovative projects like Trident’s Risk to Earn. However, OP does have a trump card in the gaming sector, which is Op Craft built on Op Stack. Full-chain games are a new paradigm. When you think of pure on-chain games, the first thing that comes to mind is the Dark Forest. Expanding the concept of pure on-chain games further, we now have a popular term called “Onchain Autonomous World,” which may be the gameplay that best embodies the characteristics of blockchain. It originates from games but goes beyond games. This trendy term was coined by Op Craft.

Summary of Pros and Cons

Optimism has four main advantages: EVM equivalence, data security, speed, and cost.

– Optimism is one of the most EVM-compatible chains, with a focus on going further and being EVM-equivalent. Optimism can utilize its Optimistic Virtual Machine (OVM) to support any Ethereum application, which is a compatible virtual machine with EVM. Developers can deploy any Ethereum-based dApp on Optimism with minimal architecture changes. This allows seamless integration of decentralized applications (dApps) built on Ethereum into Optimism.

l Optimism’s rollup architecture allows for security from the Ethereum mainnet. Transactions are processed on Optimism, but transaction data is written to and stored on Ethereum. This allows Optimism to inherit the security of Ethereum while maintaining scalability.

l Optimism is able to achieve 10-100 times scalability improvements based on the nature of transactions. Optimism provides near-instant transaction finality, allowing users to check their transaction results almost immediately.

l Optimism transactions are also cost-effective, with costs only about 1% of Ethereum transaction costs.

Optimism has three main drawbacks: long and costly withdrawal times, potential misalignment of incentives among network participants, and underlying L1 transaction auditing.

l Official Optimism bridge withdrawals have a 1-week waiting period due to the fraud proof challenge period. It’s important to note when using the network because once a withdrawal is submitted through the main bridge, it cannot be canceled. The cost of withdrawals through the main bridge is expensive, potentially exceeding $100 due to the security measures implemented in the bridge. Such a long and costly withdrawal period may have a negative impact on adoption and composability.

l The network relies on incentivized validators to challenge fraudulent proposals. If there are fewer or no fraudulent proposals, validators receive fewer or no rewards from operating nodes since they only earn rewards when successfully challenging fraudulent proposals. This can discourage validator node operation.

l If a specific transaction has enough value, the Sequencer may bribe Ethereum miners to allow fraudulent proposals to pass at very low costs during computational checks.

opBNB and COMBO Project Analysis

opBNB

opBNB is a Layer 2 network (Layer2) built on the BSC using OP Stack technology. Similar to Ethereum’s Optimism Rollup, opBNB calculates transaction data off-chain and packages it, submitting it uniformly to Layer 1 to enhance network performance, ultimately achieving high TPS, low gas fees, and the same level of security as Layer 1.

In 2020, with Ethereum network congestion, the launch of BSC provided users and developers with a fast, secure, and low-cost decentralized application environment. However, with the increase in trading volume from GameFi and others, BSC also faced network congestion and high gas fees at times, and its existing design and architecture were no longer able to meet scalability needs. In this context, opBNB emerged to provide new possibilities for solving BSC’s scalability issues.

The openness of OP Stack allows developers to easily utilize OP components to develop Layer 2 public chains. For example, Coinbase’s Base is also based on OP Stack, with the difference being that Base is an Ethereum L2, while opBNB is BSC’s L2. BNB chose OP over ZK mainly due to OP’s practicality, ease of use, high level of customization, and true EVM compatibility, allowing for rapid application development and user adoption. On the other hand, ZK has a grander narrative but higher development difficulty.

Compared to Ethereum, BSC can be described as “fast,” and opBNB is even faster. opBNB will increase the gas limit to an astonishing “100M,” surpassing Optimism’s 30MGas limit. It can process over 4000+ transfer transactions per second, with an average transaction cost of less than 0.005 USD.

With the support of the BNB ecosystem, opBNB has inherent advantages and can smoothly accommodate BNB ecosystem projects. DeFi projects include derivatives trading platform OpenOcean, popular projects like Goose Finance and BabySwap, as well as cross-chain bridge Orbit Bridge. GameFi projects include football game Ultimate Champions, NFT Farmer for the metaverse game Mobox, and upcoming game Cards Ahoy.

COMBO

Unlike the three public chain projects mentioned earlier, COMBO is a Layer 2 network focused on Web3 games. It launched its testnet in April of this year. Based on BNB Chain, COMBO is similar to opBNB, utilizing Optimistic Rollup Layer 2 technology to achieve a speed of 5,000 TPS, with gas fees as low as 0.001 Gwei.

For the convenience of game developers, COMBO has established partnerships with various infrastructure projects, providing comprehensive on-chain development tools, including:

– Full-stack development toolkit: Provides game developers with a comprehensive set of tools and resources, covering frontend and backend development, including frameworks, libraries, documentation, testing tools, etc.

– ComboUp: Provides developers with an environment that can be accessed anytime to launch games and applications. It offers templates, modules, and infrastructure to accelerate the development and deployment process.

– Web3 game solutions and ecosystem: Provides features such as asset ownership, decentralized markets, and interoperability with other blockchain-based games, while bringing together developers and players to build a complete gaming ecosystem.

COMBO’s ecosystem layout revolves around the game and metaverse tracks, from fundamental infrastructure, networks, security, wallets, data, NFT markets, to basic applications. It is supported by heavyweight metaverse projects like Lifeform, Ultiverse, and SecondLive. Though not vast, it is comprehensive.

The project has raised a total of 40 million USD in funding, with Binance leading with 12 million USD. In June of this year, the COMBO team allocated 80 million USD to the ecosystem fund to support developers creating Web3 games on COMBO, providing them with advisory and gaming industry resources to help with the Web3 game development process. There is also an opportunity for COMBO ecosystem projects to receive $100,000 COMBO token grants and further strategic investments.

COMBO is to BNB and Optimistic Rollup what Immutable is to ETH and ZK Rollup. Both are game-exclusive chains, backed by the BNB and ETH ecosystems respectively, and both utilize the two most mainstream Layer 2 technologies. Both platforms have top-tier games/metaverses, with Immutable being Gods Unchained and COMBO being SecondLive. With the influence and topicality of SecondLive’s metaverse track, the support of major sponsor Binance, and its own deep cultivation of metaverse and gaming tracks, I believe the COMBO ecosystem will also be able to take advantage of the booming development of the gaming and metaverse tracks and experience a round of growth.

Summary

In this in-depth investment research article, we have delved into the analysis of Layer 2, mainly focusing on the OP track and analyzing Polygon PoS based on sidechain technology, Arbitrum and Optimism based on Optimistic Rollup technology, as well as opBNB and COMBO, which are also based on Optimistic Rollup but have the BNB ecosystem.

Overall, Rollup is the mainstream solution in the Layer 2 track, with significant improvements and enhancements in security, speed, scalability, and fees compared to the original Layer 1 mainnet. Of course, the Rollup solution also has some existing problems, especially withdrawal delay caused by the OP challenge period, low interoperability caused by cross-chain bridges, limited types of supported assets, fragmented asset liquidity, centralized sequencers, and potential security vulnerabilities and risks of Rollup technology itself, which are also points of concern for many users. How to solve the above problems, reduce the impact of OP withdrawal waiting period, improve capital efficiency and security, and achieve decentralized sequencers will be the ongoing improvements needed in the OP track in the future.

Among the 5 Layer 2 public chain projects introduced in this article, 3 are Ethereum ecosystems and 2 are BNB ecosystems; 1 is sidechain technology (Polygon PoS), and 4 are OP architectures. It can be said that these 5 projects are the highlights in the Layer 2 and OP tracks, carrying the great responsibility of ecosystem development. Of course, there are other Layer 2 public chains based on OP technology, such as Metis, Boba, Mantle, etc., which are also the pillars of the current OP ecosystem, but due to the limited length of the article, further analysis cannot be conducted.

In the final part, because Optimism and Arbitrum are often compared, let’s discuss their differences in technical and non-technical aspects.

From a technical perspective, the main difference lies in the way disputes are resolved. When faced with challenges, Optimism relies on the Ethereum EVM for execution, while Arbitrum uses an off-chain dispute resolution process to reduce disputes to a step within a transaction, and then sends the result to the EVM for final validation. Therefore, in terms of dispute resolution process, Optimism will be simpler than Arbitrum and will also have certain advantages in speed and costs.

From a market perspective, the difference between Arbitrum and Optimism in terms of transaction data and performance is not significant, both are on a similar level, with Arbitrum possibly slightly ahead; their market valuations are also similar, with market caps of $1.36 billion and $1.32 billion respectively. In terms of market strategy, Optimism is following a horizontal expansion model of the OP Stack, attracting more developers to launch Layer 2 public chains on the platform, and has attracted the participation of strong B-side resources such as Binance and Coinbase; whereas Arbitrum has chosen a vertical ecological layout based on the Arbitrum Orbit framework and actively positioned itself in the Layer 3 track, launching XAI Games to achieve higher performance.

Let’s take a look at the GameFi field again. The ecosystem of Arbitrum is currently ahead of Optimism. Although Optimism has OP Craft, it can’t compare to the popularity of Arbitrum’s TreasureDao. In terms of exclusive support for GameFi, it also falls short compared to Arbitrum Nova, a high-frequency interactive exclusive chain, and XAI, a Layer3 game exclusive chain.

Overall, the Arbitrum and Optimism projects have their own unique features and focuses in terms of technology and market aspects. With the competition intensifying in the Layer2 track, we believe that various public chains will continuously bring higher performance, a more comprehensive ecosystem, and better user experience based on their respective advantages. In the next article, we will concentrate on exploring several Layer2 public chains in the ZK and Validium tracks to analyze the overall development of the ZK track. Stay tuned!

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