Flend Research GroupMintable Tokens of DeFi: A Degen's Guide
If you've ever glanced at decentralized finance (DeFi) on platforms like Dexscreener, you might have noticed tokens flagged with the intriguing label "This token is mintable." But what does it mean to be "mintable," and how does this feature play into the high-stakes game of DeFi and degen trading? Let's look into this fascinating aspect of crypto trading. What Does "Mintable" Mean? In the simplest terms, a "mintable" token can be created or "minted" beyond its initial supply. This ...
Flend Research GroupPermissioned and Permissionless Blockchain
Permissionless blockchains, like Ethereum, Bitcoin, and Solana, are fascinating public networks that anyone can join, use, or validate without needing approval. These decentralized systems operate without a central authority, meaning no one has to fill out paperwork or prove their identity to participate. Let's look at it as a global ledger that is open to all, here every transaction can be traced and verified by anyone curious enough to dig into it. The beauty of this setup lies in its ...
Flend Research GroupUSDT,USDC and BUSD: SIMILARITIES AND DIFFERENCES
In one of our previous article we talked about stablecoins and how they have emerged as a bridge between the traditional financial world and the realm of digital assets. These stablecoins offer the stability of traditional fiat currencies while leveraging the speed and efficiency of blockchain technology. Three prominent stablecoins in this space are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD). While they all share the common goal of being pegged 1:1 to their respective fiat curren...
Flend Research Group is a dedicated sub-department of Flend focused on providing comprehensive coverage of the financial market space.
Flend Research GroupMintable Tokens of DeFi: A Degen's Guide
If you've ever glanced at decentralized finance (DeFi) on platforms like Dexscreener, you might have noticed tokens flagged with the intriguing label "This token is mintable." But what does it mean to be "mintable," and how does this feature play into the high-stakes game of DeFi and degen trading? Let's look into this fascinating aspect of crypto trading. What Does "Mintable" Mean? In the simplest terms, a "mintable" token can be created or "minted" beyond its initial supply. This ...
Flend Research GroupPermissioned and Permissionless Blockchain
Permissionless blockchains, like Ethereum, Bitcoin, and Solana, are fascinating public networks that anyone can join, use, or validate without needing approval. These decentralized systems operate without a central authority, meaning no one has to fill out paperwork or prove their identity to participate. Let's look at it as a global ledger that is open to all, here every transaction can be traced and verified by anyone curious enough to dig into it. The beauty of this setup lies in its ...
Flend Research GroupUSDT,USDC and BUSD: SIMILARITIES AND DIFFERENCES
In one of our previous article we talked about stablecoins and how they have emerged as a bridge between the traditional financial world and the realm of digital assets. These stablecoins offer the stability of traditional fiat currencies while leveraging the speed and efficiency of blockchain technology. Three prominent stablecoins in this space are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD). While they all share the common goal of being pegged 1:1 to their respective fiat curren...
Flend Research Group is a dedicated sub-department of Flend focused on providing comprehensive coverage of the financial market space.
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In our most recent article, we focused on layer 0 and 1 of the blockchain and gave a basic overview of its tiers. In this work, we would talk on Layers 2 and 3.
Layer 2
Additional networks constructed on top of the primary or base blockchain are known as Layer 2 (L2) solutions. By removing several transactions from the main chain, they address scalability concerns. Consequently, the main blockchain would only be required to handle deposits, withdrawals, and the verification of off-chain transactions. The Base Network is one instance of this L2 blockchain.
Layer-2 scaling solutions
State Channels: State channels improve transaction capacity and speed by allowing two-way communication between blockchain and off-chain channels through various methods. Miners do not need to validate transactions on a state channel right away. Instead, these channels are secured using a multi-signature or smart contract mechanism. The final state of the channel and its transitions are posted to the blockchain once a transaction or batch of transactions is completed. Examples include Bitcoin's Lightning Network and Ethereum’s Raiden Network. In the blockchain trilemma, state channels trade some decentralization for better scalability.
Rollups: This layer-2 scaling solution process transactions outside the main layer-1 network and then upload the transaction data to the layer-2 blockchain. Layer 1 ensures rollup security by storing the data on the base layer. Rollups benefit users by increasing transaction throughput, promoting open participation, and reducing gas costs.
Sidechains: These are transactional chains that run parallel to the main blockchain, handling large volumes of transactions and having their own consensus mechanisms optimized for speed and scalability, often using a utility token for data transfer between the sidechain and mainchain. The mainchain primarily provides security and dispute resolution. Unlike state channels, sidechain transactions are recorded publicly on the ledger, and security breaches on sidechains do not affect the mainchain or other sidechains. Building a sidechain requires significant time and effort.
Nested Blockchains: Nested layer-2 blockchains operate on top of another blockchain. Layer 1 sets the parameters, while layer 2 executes the operations. Multiple blockchain tiers can exist on a single mainchain. This structure is similar to a business hierarchy, where a manager delegates tasks to subordinates and receives reports upon completion. This reduces the manager’s workload and enhances scalability. The OMG Plasma Project, for instance, acts as a layer-2 blockchain for Ethereum’s layer-1 protocol, enabling cheaper and faster transactions.
Layer 3
The application layer, often called layer 3 or L3, serves as a user interface while hiding the technical details of the communication channel. L3 applications bring real-world applicability to blockchains within their layered structure.
Closing Statement
Layer 1 is crucial as it forms the foundation for decentralized systems. Scalability issues of the underlying blockchain are addressed by layer-2 protocols. Unfortunately, most layer-3 protocols (DApps) currently operate only on layer 1, bypassing layer 2. It's not surprising that these systems aren’t performing as well as expected.Layer-3 applications are essential for developing real-world use cases for blockchains. However, they will not capture as much value as their foundational blockchain, unlike legacy networks.
You can join our communities below for more updates:
https://twitter.com/FlendCryptoClub?t=inxX2B1U66ottpijD1Mj1w&s=09
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In our most recent article, we focused on layer 0 and 1 of the blockchain and gave a basic overview of its tiers. In this work, we would talk on Layers 2 and 3.
Layer 2
Additional networks constructed on top of the primary or base blockchain are known as Layer 2 (L2) solutions. By removing several transactions from the main chain, they address scalability concerns. Consequently, the main blockchain would only be required to handle deposits, withdrawals, and the verification of off-chain transactions. The Base Network is one instance of this L2 blockchain.
Layer-2 scaling solutions
State Channels: State channels improve transaction capacity and speed by allowing two-way communication between blockchain and off-chain channels through various methods. Miners do not need to validate transactions on a state channel right away. Instead, these channels are secured using a multi-signature or smart contract mechanism. The final state of the channel and its transitions are posted to the blockchain once a transaction or batch of transactions is completed. Examples include Bitcoin's Lightning Network and Ethereum’s Raiden Network. In the blockchain trilemma, state channels trade some decentralization for better scalability.
Rollups: This layer-2 scaling solution process transactions outside the main layer-1 network and then upload the transaction data to the layer-2 blockchain. Layer 1 ensures rollup security by storing the data on the base layer. Rollups benefit users by increasing transaction throughput, promoting open participation, and reducing gas costs.
Sidechains: These are transactional chains that run parallel to the main blockchain, handling large volumes of transactions and having their own consensus mechanisms optimized for speed and scalability, often using a utility token for data transfer between the sidechain and mainchain. The mainchain primarily provides security and dispute resolution. Unlike state channels, sidechain transactions are recorded publicly on the ledger, and security breaches on sidechains do not affect the mainchain or other sidechains. Building a sidechain requires significant time and effort.
Nested Blockchains: Nested layer-2 blockchains operate on top of another blockchain. Layer 1 sets the parameters, while layer 2 executes the operations. Multiple blockchain tiers can exist on a single mainchain. This structure is similar to a business hierarchy, where a manager delegates tasks to subordinates and receives reports upon completion. This reduces the manager’s workload and enhances scalability. The OMG Plasma Project, for instance, acts as a layer-2 blockchain for Ethereum’s layer-1 protocol, enabling cheaper and faster transactions.
Layer 3
The application layer, often called layer 3 or L3, serves as a user interface while hiding the technical details of the communication channel. L3 applications bring real-world applicability to blockchains within their layered structure.
Closing Statement
Layer 1 is crucial as it forms the foundation for decentralized systems. Scalability issues of the underlying blockchain are addressed by layer-2 protocols. Unfortunately, most layer-3 protocols (DApps) currently operate only on layer 1, bypassing layer 2. It's not surprising that these systems aren’t performing as well as expected.Layer-3 applications are essential for developing real-world use cases for blockchains. However, they will not capture as much value as their foundational blockchain, unlike legacy networks.
You can join our communities below for more updates:
https://twitter.com/FlendCryptoClub?t=inxX2B1U66ottpijD1Mj1w&s=09
https://chat.whatsapp.com/GYIh4iluZFF8M9UufNEqfx
New to Crypto?
Create account with our partners and trade on Bybit Exchange
Tap to create account now
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