The Ethereum 2.0 "Phase 0 Beacon Chain" officially launched the genesis block at 8:00 pm on December 1, Beijing time, and the vision of dozens of times of expansion officially kicked off.

The main purpose of Ethereum is to solve the shortcomings of the Bitcoin network and create a safe and easy-to-use distributed network, constrained by a set of consensus mechanisms, and used by billions of people. DeFi has become the most prominent category of the Ethereum network, and the huge traffic has exposed its inherent shortcomings, scalability issues, lack of privacy issues, and many other limitations. Theoretically, Ethereum 2.0 can effectively overcome the above-mentioned insufficient functions. However, facing the "ETH + DeFi" economy with a market value of nearly 80 billion US dollars, there is still a lot of fog behind the major upgrade, and the exact timetable has not yet been released. The ideal state of Ethereum 2.0 will take a long time to achieve.

Ethereum's Layer 2 core technologies include side chains, state channels (State Channel), Plasma and Tenfold Protocol (Tenfold Protocol), etc.

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Basic ideas for Layer 2 expansion:

"Layer 2's value judgment comes from the number of tokens that run the protocol interaction and whether there is an ecology that proves its value externally."

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"The agreement itself does not actually have value, but the native token of the agreement itself is the value capture."

A side chain consists of a group of verifiers who submit the latest state of a chain to a smart contract (on the main chain), a type of system that advances in this way.

The original main chain cannot transfer value out of the chain, and the side chain realizes the two-way peg between the main chain and the protocol built by the side chain technology through a two-way anchoring method, so that the value can be circulated and transferred between the two . Using side chains, we can easily establish various intelligent financial contracts, stocks, futures, derivatives, etc., and can support multiple asset types, as well as small and micro payments, smart contracts, security processing mechanisms, property registration, etc. To understand it in another way, the side chain is equivalent to a third-party payment platform, which has the function of asset value storage on the basis of decentralization. The main chain will have stronger security from POW to POS. The TPS of the side chain depends on its verifiers. The more verifiers, the lower its TPS. However, side chains have fewer verifiers and weaker security: for example, Cosmos only has 100 verifiers.

2.1 Root Chain (RootStock)

"Technical models cannot track value."

RootStock is a smart contract distributed platform built on the Bitcoin blockchain. Its purpose is to add value and functionality to the Bitcoin network. The root chain does not have a native token, but uses a root coin that can be converted into bitcoin as the "fuel" of the smart contract, and "joint mining" with bitcoin. In addition, the root chain has a notarized organization called "Federation", which is composed of root chain developers, miners, community celebrities, exchanges...etc. Alliance for currency security. RootStock technology innovation. To some extent, RootStock uses Bitcoin as the native token to gain user base. And start joint mining, mining is also bitcoin. This is a brand new technology, but because the external ecology cannot control the locked bitcoins, its technical model cannot track the value.

BTC-Relay aims to connect the Ethereum network with the Bitcoin network in a secure and decentralized manner. Because its external ecological participation is not high and has not formed a scale, its value capture model is similar to the root chain.

2.2 Cosmos（ATOM）

"Token assets that can generate income during the transaction."

The most representative Cosmos (token: ATOM) of sidechains: a network of blockchains that can communicate with each other in a decentralized manner. Cosmos conducts transactions (communications) on other chains and charges fees. Cosmos realizes this vision through a series of open source tools, such as Tendermint, Cosmos SDK and IBC, aiming to allow people to quickly build custom, secure, scalable and interoperable blockchain applications. The value capture of ATOM is to generate profitable token assets during the transaction process, but the Cosmos team stated that it does not expect its native tokens to serve as currency circulation in the ecology. Polkadot (token: DOT), Aion, etc. have the same value structure. Polkadot provides consensus security for its forks for a fee. Aion's goal is to become a connection protocol on the blockchain, just like the TCP/IP protocol in the Internet era, to provide connection services for different blockchain networks and integrate data and value.

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Layer 2 value capture:

3.1 State Channel Protocol

"In addition to the value generated by native tokens, the protocol's external ecology can also prove its value capture."

The state channel essentially provides state maintenance services between different entities by establishing a two-way channel between different users or between users and services. It allows many operations on the blockchain to be managed outside the chain, and the final result will not be uploaded to the chain until the multi-party signature confirmation is completed after the off-chain operation is completed.

Lightning Network (Lightning Network) is a second-layer payment protocol that works on the blockchain. The purpose is to make the state channel more secure for off-chain transactions. When the state channel opens the transaction, the participants must put some tokens in the payment channel for custody, which has the possibility of realizing the stored value.

When a channel is closed and a state channel oracle receives a valid state update from one of the channel participants, it enters a challenge period during which another channel participant can submit a state update with a higher sequence number. After the challenge period ends, the valid state update with the highest sequence number is accepted as the final state. This means that the state channel has external state about user transaction state and network-level governance. Although these states are external to the protocol, they are worthless states. There is also no standard for measuring value for this.

Celer Network aims to build a blockchain application platform with fast transactions to solve large-scale commercial technology projects. There are 4 types of participants in the Token economic system established by it—cEconormy: end users (EU, End User, who only use payment services), network liquidity providers (NLB, Network Liquidity Backer, who provide the network necessary liquidity funds) and payment service providers (OSP, Off-chain Service Providers, providing state channels) and state guardians (SG, State Guardian, hosting user states). Let's capture value through its model: OSP provides a high-speed and secure state payment channel to collect transaction fees; NLB locks idle funds in the Celer network for a certain period of time to earn CELR rewards and interest, in order to allow the system to provide sufficient liquidity Sexual funds to maintain operations; SG is only responsible for custody. CELR Token, as a native token, can be used for the mortgage of liquid capital lending anti-fraud bonds, the payment medium of payment channel registration fees, transaction fees and other possible service fees.

The same model also includes Raiden Network, Liquidity Network, Connext, etc. The economic model is reasonable, but the limitation lies in the technical development of the state channel itself, which cannot be put into large-scale commercial use.

Summary: The state channel protocol and the lightning network protocol provide support for instant arrival and large-scale concurrency requirements, but the use of their protocols requires high transaction fees and asset locking, which is difficult to apply to small high-frequency transaction requirements, and there is centralization trends and risks. On the contrary, its unmeasurable external storage status is more likely to achieve value capture in the long-term development.

3.2 Plasma protocol

"A reasonable economic model has its own value, and when the technology is achieved, it will form a perfect value capture."

The Plasma protocol can be understood as a set of frameworks that provide off-chain solutions for various actual projects.

Plasma is also known as "blockchains in blockchains". Anyone can create different Plasma on top of the underlying blockchain to support different business needs, such as distributed exchanges, social networks, games, etc. When a transaction occurs on the Plasma protocol, Ethereum, as the main chain, locks the asset and then transfers it to the Plasma chain. All transactions will be carried out under the chain, not only the settlement is fast, but also the handling fee is low. In order to prevent the ledger from being maliciously tampered with, users can submit the credentials of each previous transaction to the Ethereum network, and the Plasma protocol uses its security mechanism to return the original assets, including part or all of the deposited deposit.

The Plasma protocol not only stipulates some basic state transition rules in the subchain (such as how to punish malicious nodes), but also records the state in the subchain (the hash value of the block in the subchain). In this process, users do not need to interact with the main chain at all, and can completely separate from the main chain and conduct transactions on the sub-chain.

Matic Network is a POS+Plasma hybrid side chain built on Ethereum, which can support developers to widely disperse multiple protocols of financial applications, and provide technical support for its development and promotion. An inclusive platform. Matic Network applies the Plasma framework and decentralized Proof-of-Stake (PoS) validators to ensure asset security and achieve scale. Transactions are carried out on its chain, which uses Proof of Stake (PoS) to implement consensus. Participants need to pledge Matic tokens to be eligible to serve as validators, and transaction fees are paid in MATIC tokens. Native tokens and on-chain storage functions are realized. Matic Network provides a separate mortgage mechanism in its ecosystem, that is, a certain percentage of funds is reserved in the transaction fees collected by nodes. This has nothing to do with block rewards. It is additionally prepared for developers to support the improvement of the Matic Network ecosystem. DApp projects. This move gives Matic a good ecological foundation, and there will be more and more participation, which also means that the external ecology will prove its value. A network similar to it, OMG Network, is also a network built using the Plasma protocol. However, its current network relies on a fixed set of validators.

Summary: The realization of storage value, external storage status, and native token value forms a reasonable economic model, which is suitable for large-scale commercial use. If the technology is achieved, global value capture will be realized.

3.3 Tenfold Protocol

"The external ecological scale also has a certain impact on value capture."

Tenfold Protocol, as a new expansion solution, is used to securely maintain an off-chain state machine while being able to read its state on-chain.

To conduct a transaction in the tenfold protocol, first you lock assets on the chain, and broadcast the transaction to the verifiers through the P2P network off the chain. These verifiers can download the application itself through a decentralized file system. If someone questions the result after the transaction, the questioning user (one or more) can initiate a challenge, and a part of the mortgage can be put in during the challenge. After both parties put the mortgage, the governance on the chain will vote. Each validator will see the transaction, and finally divide the deposit according to the winning party.

Although the tenfold protocol can mortgage assets and has the function of value storage, the voting mechanism does not fully represent the correctness of the result. If a person exceeds 50% of the economy, he will be able to attack the system, and participants will lose confidence in it . What kind of mechanism should be adopted to prevent such a situation from happening, and how to encourage the participation of verifiers, has become a loophole that Tenfold Protocol urgently solves.

Hyper Dragons (Hyper Dragons) is a blockchain fighting game. Players can use Ethereum to buy and sell dragons. Each dragon has its own characteristics, and its appearance can be cute or cool. Each dragon All have unique digital collection value. The combat operations of Cloud Fighting Dragon Arena are all run on the chain. In theory, unlimited battles can be performed every day, but the details depend on user activity and game product design. In the early stage of the game's launch, the disadvantages of unsustainable gameplay, unmaintainable value, excessive first-mover advantage for first-entry players, and obvious powerlessness for late-entry players emerged. Despite continuous iterations, CryptoKitties is ahead, and the development bottleneck needs to be broken through.

Summary: In the agreement, users, as direct participants and the underlying foundation of its ecology, are a crucial part. A good customer base builds a good ecology, and user activity is the most direct way to test value. The ten-fold agreement is facing a one-sided and initial stage. Compared with the above three agreements, its value motivation is far from enough.

3.4 0X protocol

"The open source ecology creates a future of value, and the external ecology realizes value capture."

The 0X protocol is an open protocol based on decentralized transactions on the Ethereum chain. It is committed to becoming a basic module on the chain and serving as a shared infrastructure for various DAPPs. Simply put, it provides underlying protocol support for decentralized transactions between various tokens on the chain. Its core point is the relayer. The 0x protocol allows anyone to build a relayer (in short, you can build a decentralized exchange through the 0x protocol template), and the relayer relayer displays and manages orders off the chain. Users After finding and completing the order, it is settled on the Ethereum blockchain, which is the so-called "off-chain transaction and on-chain settlement". Every time a transaction is facilitated, the relayer can charge a transaction fee, and the user does not need to recharge assets to the exchange account.

The 0x protocol does not have the function of storing token value, but in the contract transaction, the 0x protocol saves the external state of user preferences and network governance in the system according to the browsing traces left by users and big data analysis. value, and there is no standard for value measurement. The 0x protocol has a highly autonomous community ecology. Possessing its native tokens allows voting, and participants gain governance rights over the protocol. This also endows the value of native tokens in the protocol, and realizes value capture through its external ecology.

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Layer2 ideal value capture model:

Value storage: The smart contract platform should have the function of value storage and capture the value in the ecology, so as to provide a security guarantee for the entire ecology.

Native Tokens: Investors in cryptoassets are not actually investing in the protocol, but in the scarce assets needed to make a protocol work.

External ecology: Refers to the community ecology with storage value or high degree of autonomy that can prove its value from the outside.

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Layer 2 expansion was born to solve the current bottleneck of the Ethereum network. Although it is an emergency move, with the continuous development of blockchain finance and the accumulation of the global economy, even if "Ethereum 2.0" is really realized, in enterprise solutions, Layer 2 With its high-speed processing speed, it has won market share and obtained investment value. Good layered architecture models are also recognized. While no defensive action is required, the real value capture is the network effect created through the value of the state they preserve.