Table of Contents:
Hard and Soft Forks: What Are They?
What is Layer 1 Scaling?
Layer 2 Scaling: Rollups
Layer 2 Scaling: Side-chains
What is a Bridge?
Hard and Soft Forks: What Are They? This concept is similar to reaching a literal fork in the road. In crypto, it's a little more complicated as it involves the nodes that store, maintain, and validate the blockchain.. There are also two types, hard and soft forks.
In its simplest form, a fork is when there is a split in the protocol - the way the blockchain operates and processes things. This typically happens when a blockchain needs a large update or a large enough group of token holders decide to change the protocol. Hard forks are implemented for a variety of reasons. These include: correcting current or potential security risks,adding new functionality, or for philosophical reasons. Just this September, Cardano hard forked in order to allow more smart-contract functionalities. More memorable is an Ethereum hard fork that caused a large drop in price and brought some serious doubt to the protocol. They had to address a serious security threat by reversing fraudulent activity on the old blockchain by forking and creating a new blockchain (obviously, this sparked some outrage because it involved changing the history of the chain; keep in mind, however, these were in the very early days of Ethereum). Typically, a fork requires that all participants (validators, including miners or stakers, and nodes) agree to the new update and run the new software.
Soft forks are different because they are “backwards compatible”. Old nodes in the system will still recognize the new way of doing things as valid. Since new blocks and transactions still follow the old rules but just are slightly changed, the nodes don't need to be upgraded. This is a much easier transition as old nodes can adapt without rush.
Video:Article: https://cointelegraph.com/blockchain-for-beginners/soft-fork-vs-hard-fork-differences-explained
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-What is Layer 1 Scaling? Layer 1 scaling solutions are developed to help improve the base protocols (the actual blockchain) of networks like Bitcoin, Ethereum, and others. They do this by changing the actual network itself. This could include changing the consensus algorithm, changing the amount of transactions allowed in a block, adding new communication methods to “talk” to other blockchains, or many other things. The goal is to make transactions cheaper and faster. Layer 1 solutions aren't the only way to scale blockchains; layer 2 solutions can help with scaling by establishing an additional protocol on top of base layer blockchain, and we will discuss those next.
Video:Article: https://www.gemini.com/cryptopedia/blockchain-layer-2-network-layer-1-network
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-Layer 2 Scaling: Rollups: “Layer 2s” are able to scale blockchains chains by adding another layer. Rollups are not really their own blockchain; the difference is complex, but just know that they’re a bit different. Rollups, a type of layer 2 scaling solution, derive their security directly from the underlying blockchain (the blockchain the rollup is built to add scaling to), differentiating them from side-chains (discussed next). This is perhaps the most important aspect of a well-made rollup: you do not have to rely on separate security as you do with side-chains. Instead, you get the same security as the base chain. For instance, when using a rollup designed to scale the Ethereum blockchain, your funds are still secure no matter what disaster could happen to the rollup (if the base blockchain, like Ethereum, died, that’s a different story).
From a user’s perspective, you typically access a rollup by taking tokens from the base blockchain and transferring them to your account in the rollup. To withdraw later, you send them back to the base chain.
The main layer 2 solutions are zero-knowledge (ZK) rollups and optimistic rollups. Zero-knowledge rollups rely on zero-knowledge cryptography in order to validate transactions without actually knowing the details of the transaction. This may sound impossible, and the details/math is certainly complex, but projects like dYdX and Immutable X are already using ZK-rollups in production to massively reduce fees. Zero knowledge cryptography, overall, will likely be very important in the future for a variety of use cases, so it’s cool to see it already getting such heavy adoption in the crypto space.
At a high level, ZK-rollups work by taking transactions, bundling them together in a succinct way along with a proof of their validity, and submitting that proof (along with some other data) to the underlying blockchain. The bundling of transactions and reduced storage on the underlying blockchain allow for a large reduction in gas fees, as the fees are essentially distributed among all participants in a bundle (the implementation of this can differ in practice). Compared to Optimistic Rollups, ZK-rollups have more privacy built-in and allow for faster withdrawals because there is no way for an invalid proof to ever be submitted to the underlying blockchain. If a bundle of transactions, along with the proof that they are valid, gets committed to the underlying blockchain, you know all transactions included are correct; this is the magic of zero knowledge cryptography. To withdraw, you’d just have to wait for the next batch of transactions to be submitted, or pay more to send the entire batch immediately. However, creating the proof of validity is more expensive than using an Optimistic rollup, and the complexity of working with ZK-rollups make them currently infeasible for certain cases (though this is being worked on quickly!).
Optimistic rollups, also known as ORUs, have some desirable features that are not included in current ZK-rollups like less computation requirements and less cryptographic requirements. So, how do ORUs work? First, just like ZK-rollups, transactions are batched and submitted to the underlying blockchain. However, there is no zero knowledge proof, so you do not 100% know that the bundle is right. To fight this, ORUs also require the "operators" who batch and submit these transactions to also send some of their own tokens too. These tokens will be returned if the batch is correct, and taken away if it is not. This incentivizes operators to verify and execute transactions correctly.
Video:Article: https://www.gemini.com/cryptopedia/blockchain-layer-2-network-layer-1-network
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-Layer 2 Scaling: Side-chains: A side-chain is sort of a hybrid between layer 1 and layer 2 scaling solutions. A side-chain is an independent blockchain that runs in parallel to a main, layer 1 chain. Side-chains allow for the open transfer of cryptocurrency to itself and back to the main chain. They also require a degree of trust, because they, unlike rollups, do not inherit the security of the main chain. They have their own security. This means that a successful attack on the side-chain, even one that did not affect the main chain at all, could result in a loss of funds. Overall, side-chains provide increased scaling by providing an optional chain where users can move to, helping to reduce some of the validation and transactions processing responsibility of the main chain. A popular example of a side-chain is Polygon’s Matic side-chain, which runs using the MATIC token.
Video:Article: https://coinmarketcap.com/alexandria/glossary/side-chain
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-What is a Bridge? A bridge is a way to move funds from one blockchain to another. The design of a bridge can vary, but that’s the use case. We’d recommend checking out our How to Bridge Tokens From One Blockchain To Another tutorial for an example.
Why bridge? You would bridge if you wanted to do something on another network, such as use a decentralized exchange on Avalanche, but you only had assets on another chain such as Ethereum. Bridging would allow you to get assets on Avalanche instead.
Why not bridge? If one of the two chains you are bridging (to or from) is Ethereum, you will likely have to pay a high gas fee. Also, sometimes there is no reliable bridge between two lesser-known blockchains, so it is impossible!
Video:Article: https://coinmarketcap.com/alexandria/article/what-are-blockchain-bridges
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