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- One main reason that the price of Bitcoin can reach €250,000.
- Two specific methods that allow high profits. Even in times of falling prices.
- When is a new high in crypto prices expected?
- Which cryptocurrencies to buy in times of crisis?
- 5 factors behind new records in crypto.
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The popularity of cryptocurrencies and blockchain technology is constantly growing, along with the number of users and the daily number of transactions. As interest and transaction volume increases, problems arise that limit the potential and number of users of the blockchain itself. There are already solutions on the market that will help meet the demand for increased use of decentralized networks. These solutions are called “Layer 2”.
Photo: Increased use of Layer-2 technology”.
The concept of the “Blockchain trilemma” asserts that it is practically impossible to achieve sufficient levels of security, decentralization, and data shrinkage without sacrificing one of these three factors. Therefore, blockchain technology is only able to provide two of these functions at a time. As a result, many experts and developers have focused on addressing this issue in order to provide a more user-friendly experience and increase the potential for the technology’s use in the world.
The main problems of current blockchain technologies are:
- Decentralization;
- Security;
- Data compression (the ability of the blockchain to support increased workloads of "nodes" supporting transactions)
Before we delve deeper into Layer-2 technology, it’s important to understand that every blockchain requires a transaction fee to be paid to miners who verify and transmit the transaction, covering their costs and providing a small profit.
Additionally, every chain has a limited number of blocks per day that it is able to process. This limits the number of transactions that the network can perform per day, with a system of “auction” payment of transaction fees to miners in exchange for verifying these blocks.
In recent years, the Ethereum network has become so popular and widely used that the average price for a mined transaction was around $30, with some people paying hundreds of dollars (on the Ethereum network). This is when the Ethereum chain became a major obstacle for many users and the true value of Layer-2 systems was realized!
The technology allows chains to perform many micro-transactions without spending time waiting for miner confirmations for the transaction and thus paying unnecessary fees to those miners.
Such solutions are extremely necessary at a time of increased traffic on popular chains like Ethereum, where they have enabled the use of the network, or chain, by masses of people.
It is also necessary to mention that not all Layer-1 chains need Layer-2 technology, as their network is built differently than Ethereum and Bitcoin, where Layer-2 solutions are almost necessarily needed. Solana, Cardano, Ripple, Binance, Polkadot, and others operate on different mechanisms where saturation does not play such a role as to require external providers for faster processing of transactions.
- Two specific methods for high returns, even when prices are falling.
- What will the majority do and what should you do to be in a better position?
- Background of the crypto crash and leverage of big opportunities.
- Which cryptocurrencies to buy during a crisis?
- Trends, trading, earning techniques.
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Polygon (Matic) network
The Polygon network uses MoreVP (More Viable Plasma) technology, which allows its assets on the Ethereum network to stay where they are while transactions can be processed separately on the Layer-2 network at an extremely low cost of executed transactions.
In the image below, we see how large the price differences are.
Photo: Comparison of Ethereum and Polygon Network (average transaction fee)
Due to its exceptional practicality and concurrent use of the reliable Ethereum network, Polygon has gained a large number of users, as well as larger institutions that use blockchain technology, but want to make it more accessible to the general public. Among these companies are NFL, Adobe, Starbucks, Disney, Mercedez Benz, Meta, Reddit, and many others. The exponential increase in network usage can be followed by various indicators, the most interesting of which is the growth in the number of wallets on the Polygon network (picture below).
Photo: Growth in the number of wallets on the Polygon network.
The Ethereum network generally has more Layer-2 solutions currently on the market; Polygon, Arbitrum, Loopring, ImmutableX, xDai Chain, and others. On the other hand, there are significantly fewer for Bitcoin.
Notable Bitcoin Layer-2 projects include:
- Lightning Network, a protocol that offers fast and inexpensive micro-transactions using the Bitcoin network, with an average transaction cost of 0.01$.
- Liquid Network, specifically optimized for merchants and crypto exchanges, where fast processing and confirmation of Bitcoin transactions is important.
- Omni Layer, specifically designed for creating and trading specifically customized crypto coins and assets.
There are many questions about the future of Layer-2 chains regarding security compatibility, as these networks allow for specific customization of services for specific needs, which can quickly lose the entire meaning of the Layer-1 network. Currently, Polygon is considered the most successful developer of Layer-2 networks, but currently has little competition, as many are focused on building better optimized Layer-1 networks that do not require external Layer-2 service providers.
Buying cryptocurrency. Buy cheap, sell high. Whoever understands this, achieves everything. We are now entering a period when very favorable purchases of cryptocurrencies will be possible.
- Which cryptocurrencies to buy this year?
- Top 10 crypto projects with the possibility of 100x growth.
- 5 common ways people lose their investments.
All this and more will be discussed in the webinar.
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