Video: Scaling DeFi
Way back in our very first Weiss Crypto Sunday Special, analyst and editor of Weiss Cryptocurrency Portfolio, Juan Villaverde explained Layer-2 protocols as solutions that “push transactions off the main blockchain” in order to reduce transaction times and fees.
In this week’s Sunday Special, Juan rejoins Chris Coney to explore the details of scaling decentralized finance (DeFi) and newer Layer-2 solutions.
According to Juan, one of the disadvantages of early Layer-2 solutions was the requited trust.
When you're on Polygon (MATIC), you're basically on a separate blockchain. The issue there is being on a separate blockchain means you're implicitly trusting an entirely new set of validators. You're not trusting the Ethereum miners with your money or with your funds, you're trusting the Polygon validators.
But newer solutions, while still in their early stages, are looking to remedy that. Arbitrum, for example, has the advantage of allowing any individual to verify the whole chain, making it a truly trustless Layer-2.
In this episode, Juan delves into:
- The pros and cons of Polygon vs. Arbitrum.
- New Layer-2 protocols that are still in development.
- The benefits of bridging from a Layer-2 to the mainnet, and how users can keep validators honest.
As crypto adoption rises, sending rates and transaction times higher, Layer-2s are going to be attached to more and more mainnets. Understanding the pros and cons of each kind will become vital to crypto investing.
I highly recommend you watch the full video now.