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Construction of the Tunkhannock Viaduct railway bridge in Pennsylvania (cc). Roman engineering principles being extended to new uses.

Making Sense of Ethereum’s Layer 2 Scaling Solutions: State Channels, Plasma, and Truebit

  • First, we’ll discuss the scaling challenges of ethereum (and all public blockchains) in general.
  • Second, we’ll cover the different approaches to solving the scaling challenge, distinguishing between “layer 1” and “layer 2” solutions.
  • Third, we’ll delve into layer 2 solutions and explain how they work — specifically, we’ll talk about state channels, Plasma, and Truebit

1. The scaling challenges of public blockchains

I. What if each node didn’t have to process every operation in parallel?

II. What if we could squeeze more useful operations out of ethereum’s existing capacity?

2. Layer 2 solutions are cryptoeconomic solutions

I. State channels

Features and limitations

  • State channels rely on availability. If Alice lost her internet connection during a challenge (maybe because Bob, desperate to claim the prize, sabotaged her home’s internet connection) she might not be able to respond before the challenge period ends. However, Alice can pay someone else to keep a copy of her state and maintain availability on her behalf.
  • They’re particularly useful where participants are going to be exchanging many state updates over a long period of time. This is because there is an initial cost to creating a channel in deploying the Judge contract. But once it is deployed, the cost per state update inside that channel is extremely low.
  • State channels are best used for applications with a defined set of participants. This is because the Judge contract must always know the entities (i.e. addresses) that are part of a given channel. We can add and remove people, but it requires a change to the contract each time.
  • State channels have strong privacy properties, because everything is happening “inside” a channel between participants, rather than broadcast publicly and recorded on-chain. Only the opening and closing transactions must be public.
  • State channels have instant finality, meaning that as soon as both parties sign a state update, it can be considered final. Both parties have a very high guarantee that, if necessary, they can “enforce” that state on-chain.

II. Plasma


But how can this be safe?


III. Truebit

Simplified conceptual diagram of Truebit




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