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Ethereum is seeing a huge increase in both price and attention in the past few months. This can be attributed to the activity happening on various decentralized finance projects, and more people jumping on to the NFT buzz. The Ethereum network also received a fee-burning upgrade recently which is on trend to affect the daily issuance rate and make Ethereum deflationary. This collection of good news for Ethereum also means that fees on Ethereum’s base layer are high more often than not. If you are not paying attention to network congestion, you could end up paying hundreds of dollars in ETH just to list your NFT.

This is why Ethereum has multiple scaling solutions that will help users deal with better fees while still transacting with Ethereum. Today we are looking at two scaling solutions for Ethereum – Arbitrum and Polygon.

Polygon (MATIC)

Polygon is a side chain of the Ethereum network and is seeing a wide range of usage: the biggest NFT marketplace now integrates Polygon allowing you to mint NFTs and sell them at little to no cost, and exchanges such as crypto.com allow stablecoin withdrawals through Polygon’s sidechain. Fees on Polygon are extremely small and to move around the chain requires using its token as fuel, MATIC. To be able to take advantage of Polygon, you will need to bridge layer 1 ETH assets to layer 2. This will involve smart contract transactions in appropriate fee ranges of layer 1. But once you are on the other side of the bridge, you can take advantage of top defi projects such as AAVE to lend your assets and generate additional value from assets sitting around.

Abritrum

A main reason people don’t like moving Ethereum and Ethereum assets are the fees. In addition, having a solution that requires an additional token – such as Polygon’s – may prove to be just too complex for a mainstream userbase. As a business, would you rather deal with at least two tokens, Ethereum & MATIC, when conducting business on Ethereum, or would you rather just deal with one? This is what Arbitrum is. Arbitrum is a layer 2 solution called a Rollup. Rollups like Arbitrum don’t require a new token on its scaling solution – you can use Ethereum for your gas fees. And because it is a scaling solution – fees are much lower on Arbitrum and continue to shrink as more users shift to Arbitrum. Both solutions ideally share the base security of Ethereum layer 1. However, Polygon has its own consensus mechanism to ensure MATIC is secure while Arbitrum’s consensus builds off more directly from layer 1.

Soon, more infrastructure can be built to support increased usage of layer 2 solutions on Ethereum. The tech is in working condition now which indicates being incredibly early in this space. That means there is risk of smart contract failure, hacks, etc. but also opportunities like first mover advantage, becoming a resource that users need, and diversification.

Interested in implementing Ethereum in your business? We can help. Fill out the form below for a free consultation from 3CX!

 

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