What can Layer2 bring to Polkadot DeFi?

How hot is DeFi? Recently, Bitwise, a well-known crypto asset management institution, announced the launch ofDeFi index fundsBitwise DeFi Crypto Index Fund, whose custodian is Anchorage Digital Bank, is the firstUnited States of AmericaApproved digital asset bank, which means that more ordinary users will be able to participate in DeFi in the future, and make DeFi gradually move from the encryption circle to traditional finance.

On the one hand, we see the unlimited potential of DeFi, and on the other hand, we also see that DeFi still faces common problems:Transaction congestion and high fees。

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As early as last summer when the first wave of DeFi hit, Uniswap founder Adams said that the Uniswap team was exploring Layer 2 solutions, and at the end of 2019, the Uniswap team cooperated with Optimism to launch"Unipig", a proof-of-concept to test Uniswaps Layer 2 extension.

As mentioned in the 2021 work priorities announced by Uniswap,2021 will be the year of Layer 2 exploration, which means that Uni is likely to further implement its Layer 2 solution with Optimistic Rollup. Although Optimistic security is not the best, if it can greatly reduce transaction fees and provide transfer speed, why not do it?

In addition, in the last month, with the Optimistic Rollup expansion plan, the Optimism team launched the trial operation network of the Optimistic Ethereum main network. In the following month, the number of tokens pledged by Synthetix, the king of the synthetic asset track, in the Optimistic Ethereum network has exceeded 6.62 million, worth more than 150 million US dollars, the growth momentum is amazing.

In addition, there are companies like ZKSwap that are based on ZK-Rollups technology and adopt the AMM model in terms of positioning.Layer2 Decentralized Exchange, which introduced that sending 9,000 transfers on Layer 2 would cost a total of 1,500 USD in Gas (the on-chain fee from Layer 2 to Layer 1), while the same situation on the Ethereum mainnet would require 180,000 USD.

Through the above example, we can clearly feel thatDeFi + Layer2 first level title

In the Polkadot ecosystem, Plasm Network has been exploring solutions for layer-2 expansion from the very beginning. And the virtual machine (Optimistic Virtual Machine, OVM for short) developed by the Plasma team supported by the Ethereum Foundation is adopted to be compatible with all current Layer2 solutions.

OVM is a virtual machine that supports all Layer2 protocols, and it is the unification of all Layer2 scalability structures, which means that in addition to Plasma, Plasm is also compatible with other Layer 2 protocols such as state channels, Optimistic Rollups, ZK Rollups, etc. For details, please refer to PolkaWorlds previous articles:Does Polkadot Need Layer 2?

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At present, the vast majority of blockchain developers are using Ethereum smart contracts and related tools, and more than 90% of DeFi applications are also on Ethereum. Plasm allows Ethereum-based developers to migrate to Plasm by being compatible with EVM, which is also one of the important goals of Plasm.

Plasm builds the EVM module through the Solang compiler, develops the RPC module in Frontier, and implementsCompatible with Ethereum. Not only can it be compatible with all the tools of Ethereum, but also can deploy smart contracts in the same Solidity language as Ethereum on Plasm.

For current DeFi projects, the performance and cost issues of Ethereum cannot be ignored. Finding a new high-performance chain and migrating to it is one of the ideas of DeFi projects.

In fact, projects such as Compound and Sushi are trying to build their own chains through Substrate and transfer them to Polkadot. This method is not only in terms of technology development, but also in the economic cost of accessing Polkadot (bidding for parachains).Relatively high, most of the DeFi applications that want better performance and lower handling fees, the best way is to be based on an existing smart contract chain. Known as Ethereum 2.0 on Polkadot, it has a performance comparable to Ethereum 2.0Higher TPS, lower transaction costs and faster block determinationsecondary title

Plasm believes that future DApps are inseparable from the development of Layer 2. Plasm is integrating ZK Rollups and Optmistic Rollups, which will enable Plasms network to support various DApps and abstract all these complexities with one development environment. In short, it is to simplify the development of DApp and provide various powerful scalability. When developing on Plasm, DApp developers will no longer need to consider issues such as performance and cost, but can focus on DApp with peace of mind. own development and operation.

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Plasm designedmanagement rights transaction(Operator trading) andDApp Rewards A mechanism to motivate Dapp developers to join the Polkadot ecosystem.

Management rights trading is a mechanism for buying and selling dapps/smart contracts in the Plasm network, which is very similar to a mechanism for mergers and acquisitions. With the help of the dApp reward mechanism, the administrator (Operator) of the smart contract may benefit from it. This mechanism will create a new off-chain market.

The DApp Rewards mechanism is to distribute 50% of the staking rewards in the Plasm network to DApp (or smart contract) developers. Other users in the network can also participate in smart contracts through nominations, and DApp nominators can also receive rewards proportional to the number of pledges.

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Up to now, we have also seen that the technical progress and ecological cooperation of Plasm are also showing that the support for DeFi is gradually strengthening.

At present, Plasm has jointly developed a toolkit with Polkadot privacy infrastructure Phala Network, which will provide privacy functions for future DeFi projects. Besides that:

• Plasm integrates ETH wallet MetaMask in Polkadot.js

• Plasm partners with Reef Finance to develop DeFi applications

• Plasm and Acala realize the first XCMP cross-chain transfer

• Zenlink will also integrate the DEX module into Plasm, and conduct a parachain cross-chain transaction test on Rococo V1

• ZK Rollup integration tests on Plasm completed successfully

• Summarize

compatibilitycompatibilityAt the same time as the bridge, it will also bring an important entrance to the Polkadot DeFi ecosystem. As a smart contract platform with good Dapp scalability, Plasm can not onlyLayer2mechanism designmechanism designAttract more contract developers and bring more possibilities to Polkadot DeFi.