Reports & Analysis

With the launch of Ethereum 2, what will happen to second tier solutions like Paligan?

With the launch of the second version of the Ethereum network, it may seem that second-tier scalability solutions, such as Polygon, which are now helping to reduce the density in the Ethereum blockchain, become obsolete and no longer useful. However, experts believe that networks like Paligan have unique features that, even with the launch of the second version of Ethereum, can still play an important role in the digital currency ecosystem, especially the decentralized finance industry (DeFi).

to the Report Decrypt, updating Ethereum II version of the network will make this digital currency much more efficient than before. More security, faster, cheaper and less hassle-free transactions are the hallmarks of Ethereum II. In short, the second version will improve the scalability of the Ethereum network.

Users of decentralized applications have been using Paligan for months. Paligan is a second-tier scalability solution designed to reduce congestion in the Ethereum network. Paligan had attracted a lot of media attention in April and May. At the time, the Paligan network seemed to be stepping up its success ladder and expanding its partnership with other companies in the field through its solution to the problem of astronomical fees and meeting the demand of Ethereum users.

Now that Ethereum Hardfork London has passed and developers are completing the transition to a network proof-of-stock mechanism, what fate awaits Paligan and other second-tier solutions? Can Paligan prove to be more than just a temporary solution to Ethereum’s problems? To answer this question, it is necessary to first examine the mechanism of the Paligan network and then talk about the position of this network in the second version of Ethereum.

Also read: What is Ethereum 2.0? ; Everything you need to know

What is Paligan and how does it work?

The Paligan network, formerly known as Matic, is an exchange scalability solution for Ethereum, meaning it can connect with other blockchains and solve network congestion problems. Paligan offers a variety of scalability methods to decentralized applications that speed up transaction processing. This feature is important for programs focused on decentralized finance. Although decentralized applications allow digital currencies to be borrowed and traded without intermediaries, processing transactions at the wrong time can result in losses of several thousand dollars for users of these protocols.

The second layer scalability solutions can be divided into two general categories of cumulative networks (Rollups) and Sidechains. Cumulative networks operate independently of the Ethereum Blockchainchain, and transactions are processed in groups instead of individually, and each group of transactions is sent to the main network as a single transaction. The various forms of cumulative networks include Optimistic, Plasma, Validium, and ZK-rollups, the main differences being the method of grouping and verifying transactions; however, in all cumulative networks, a group of transactions as A transaction is entered and referred to the main network for final approval.

Peripheral networks, on the other hand, are essentially simulated examples of the main Ethereum network that carry out the transmission and processing of transactions entirely on their own network, but it is also possible to send transactions to the main network if necessary. In fact, in peripheral networks, unlike cumulative chains, there is no need to verify transactions in the main Ethereum network.

The Paligan network currently offers only one of these scalable solutions; Cumulative plasma network or matte stock proof that is compatible with Ethereum blockchain. While cumulative and lateral chains are both ways to increase scalability, they differ in security levels. Peripheral chains use the security structure of the Ethereum network, while peripheral networks use their own security protocols.

Paligan’s position in the second version of Ethereum

With the launch of Ethereum 2, what will happen to second tier solutions like Paligan?

Some believe that scalability solutions, such as Paligan, are only temporary tools designed to fix scalability problems before completing the Ethereum upgrade to the second version. This much-anticipated update shifts the Ethereum network mechanism from proof-of-work to stock-proof, and in addition to reducing congestion, increases network security. The second version uses a different method to improve scalability called Sharding or Horizontal Partitioning.

Simply put, sharding is a scalable solution that increases network performance by dividing the blockchain into different parts. In this system, each shard works differently from the other shards. This network structure enables it to manage various activities separately, such as intra-chain transactions for Blockchain games, and to separate them from other transactions.

It should be noted that the Sharding approach does not mean the end of other scalable solutions.

Future network partitioning based on future Ethereum stock proofs alone can increase network processing power from 15 to 3,000 transactions per second. To calculate Ethereum processing power, you must multiply the number of 50 transactions per second, which is the base processing power in stock-based networks, by 64. The number 64 corresponds to the number of shards intended for the structure of the second version of the Ethereum network. Visa on its platform can process about 1,700 transactions per second, so it can be said that the processing power of the second version of the Ethereum network is an acceptable figure.

Combining shading with other scalability solutions can increase Ethereum network processing power to 100,000 transactions per second. In addition to increasing Ethereum’s efficiency in peer-to-peer transactions, the partnership also increases the network’s ability to process more centralized transactions such as blockchain-based computer games, NFT tokens, and decentralized financial protocols.

What is Paligan’s next step?

Paligan has not been unemployed so far. The digital currency network has an ambitious roadmap that includes the launch of optimistic cumulative chains, ZK-rollups and Volidium.

ZK-rollups networks convert a set of out-of-processed transactions into a transaction and use the Zero-Knowledge Proofs method to register them publicly in the main Ethereum network.

Unknowing proof is a cryptographic method in which transactions are processed without the need for public disclosure and registration of information on the network. This information includes the sender’s address and other details related to digital currency transactions.

Volidium networks also use the method of proof without knowledge, with the difference that in this type of networks data related to transactions are stored out of chain. Optimistic networks, however, use the Fraud Proofs method, which allows network operators to verify and object to transaction validity by placing transaction requests in the main Ethereum network and setting a challenge period.

Paligan is working to launch the aforementioned solutions as soon as possible. The $ 250 million partnership agreement signed between Paligan and Hermez in August this year, the ZK-rollups-based Open-Source Scalability Improvement Project, is the first full merger of the two Blockchainks in the history of the digital currency industry. After the merger of the two networks, the authority was given to the holders of Hormoz Tokens (HEZ) to convert their assets into Paligan tokens.

Because Ethereum creator Vitalik Butrin has repeatedly said that the network needs cumulative plasma, optimistic and ZK-rollups, if Paligan can launch these aggregates as promised in the near future, it will be a problem. It will not have a place in the second version of Ethereum and may become an important part of this network in the future.

Why are cumulative networks important?

Paligan can reduce transaction costs and turn Ethereum into a more cost-effective network. Haseeb Qureshi, CEO of Dragonfly Capital, published an article on July 8 entitled “I’m worried that no one cares about cumulative networks,” in which it charges for transactions in the Ethereum network and Paligan compared.

He wrote in his article:

The Paligan network currently charges a fee of $ 0.001 for a transaction such as Uniswap transactions. [هزینه چنین معامله‌ای] In China China, the binance is $ 0.20 and in the Ethereum network it is $ 7. [این در حالی است که] Ethereum’s cumulative optimistic solutions reduce this cost to about $ 0.68.

This suggests that transaction processing costs on Ethereum-compatible networks such as Smart China Bainance and Paligan are much cheaper than the main Ethereum network, although this cost difference can be associated with reduced network security. However, performing transactions on more secure cumulative networks will only add a fraction of what is currently received to the transaction fee, which will not be a significant figure.

To sum up, Paligan can continue to operate as one of the leading decentralized finance platforms, even after launching the second version of Ethereum in the coming months, given its plans to expand its networking tools.


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