Oracles first preceded the current bull market. Then Defi ignited it and NFTs shifted things into second gear. Now, many are looking at Layer 2 (L2) solutions as the next game in town. There are dozens of L2 solutions including Fantom ($FTM) as seen below. A Layer 2 solution that has recently “mooned” and we are sure to see this trend with other L2s as the capital follows.
Historically, we have heard maximalists demand that ‘transactions remain on chain’, declaring war on Bitcoin’s seg-wit and lightning networks and ultimately creating another chasm among the many sects of BTC. Scaling Ethereum on the other hand is scrutinized for quite the opposite. Hosting Defi, NFTs, and many more dApps, scaling Ethereum is now viewed as a requirement. There will be a community call on February 26th, 2021 at 14:00 UTC to discuss a temporary solution called EIP-1559 which is proposed so that
“Transaction fees are much more predictable for users on the Ethereum network. A transaction pricing mechanism that includes fixed-per-block network fee that is burned and dynamically expands/contracts block sizes to deal with transient congestion.”
Still, EIP-1559 will not solve the entire issue. The next step for scaling includes Layer 2 solutions, which in simple terms, imports transactions from another chain. This process inherently holds greater risk but is this risk worth its reward?
Well, as it stands, Bitcoin processes 4.6 transactions per second (TPS) and Ethereum processes 15 TPS. Visa and MasterCard are able to process up to 65,000 TPS. Quickly clogged, blockchains cause gas wars every day that squeeze out the low capital users from playing with dApps.
Sources that have transacted on testnets claim layer 2 solutions offer tens of thousands in TPS. Many Defi networks have already announced their choice of Layer 2 solution. Meanwhile, we are watching a test run in real-time through networks within the ERC-20 community that rely on consistent price feeds. We have seen flash loans that exploit arbitrage or drain vaults with millions of dollars executed through smart contracts exposing that reliable price feeds remain a must.
This is why the BTC community has caused such a dilemma as fortunes are at risk. Which brings up the question: Is Ethereum’s fate destined for the same outcome? There is a rumor that L2 solutions require one major thing to mitigate the risk and that one thing will satisfy all the network needs. The Oracle.
An oracle will provide constant data between the Layer 2 solution and mainnet Ethereum. As the oracle obtains more and more data, their price feeds become stronger and more resilient to exploitation. Oracles have been gathering data for several years now so it is only a matter of time before Ethereum is able to meet its network demands. In fact, many believe it’s already achieved this and only stalling implementation. Once implemented, it may be too late.
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