Today, we are excited to announce the launch of a new version of layer2.finance under the ZK Proofs model. Previously released v0.1 under Celer’s optimistic rollup model, this new version is built by integrating StarkWare’s StarkEx solution and aims to further reduce costs for the end user. This initial alpha release integrates with Compound protocol on Ethereum and will act as a starting point for a gradual expansion to other protocols and chains via Celer Inter-chain Messaging Framework as an inter-chain yield aggregation protocol.
Why do we need layer2.finance?
Layer2.finance tackles the two largest challenges preventing DeFi from reaching mass adoption: the extraordinarily high transaction fees and being very difficult to navigate and use. Layer2.finance is a novel solution that allows people to have simple one-click access to all existing DeFi protocols at a fraction of the cost by acting like a “DeFi Public Transportation System”.
The core concept of layer2.finance is to allow multiple people to split the cost of an individual layer1 DeFi transaction by aggregating their fund deployment instructions on a specialized layer2 rollup. layer2.finance can be seen as a subway network under DeFi City. Now, instead of being forced to hail the expensive limo services (L1 transactions) to get to these DeFi shops individually, multiple people can take our public transportation solution and drastically reduce their costs. Here is a simple step-by-step breakdown:
- Buy a “metro pass”: send one low-cost transaction to move your funds from layer1 blockchain to layer2.finance’s rollup chain. Note that in layer1, your funds are moved to a common fund pool.
- Get to the subway station and wait at the right platform: click a button to send a layer2 transaction saying that “I want to send $200 to the Compound protocol.”
- Board the subway with everyone else heading to the same shop and get to your yield-earning shop: layer2.finance will aggregate all the fund allocation demands together and send one single layer1 transaction to allocate funds in the shared funding pool. Everyone on that subway shares in the single layer1 transaction fee.
- When you want to move your funds to some other yield-earning shops, even ones with higher return and higher risk, you can simply repeat steps 2, 3, and 4.
You pay much cheaper DeFi costs because instead of paying one full transaction cost (the limo fee) for every single fund allocation demand, layer2.finance essentially splits the cost of one single layer1 fund allocation transaction across all the users on board the same layer2 subway train. If there are 100 people on the train, you can easily lower the cost by 100X. With this, it is possible to aggregate many smaller fund allocation demands to be just as strong as the millionaires using the layer1 blockchain.
Lower Cost, Better UX and Higher Security with ZK Rollup
Sharing the same vision, since the launch of the v0.1 version of layer2.finance, Celer and StarkWare have been collaborating to iterate on a new generation of layer2.finance based on ZK proofs technology enabled by StarkWare’s StarkEx solution. Compared to the Optimistic Rollup solution, ZK Rollup enables fast finality without any delay for block validity challenges.
To explain the benefits, we ride on the same analogy of subway trains. When using the Optimistic Rollup model, when users boarded the train, the train door will be closed but everyone will still need to wait at the station for approximately 8-12 hours before the train actually leaves for the destination. This obviously hurts user experience because especially under heavy user load, users might miss certain time-critical DeFi yield opportunities.
In comparison, under the ZK Rollup model enabled by StarkEx, the moment the train door closes, the train will immediately leave the platform for the final destination. Practically speaking, this benefit shows itself the most when the level of user activity is high so that the zk proof can be generated on a reasonable per capita cost. In addition, with the off-chain data availability enabled by StarkWare’s Validium, the costs of on-chain call data is further eliminated with a decentralized Data Availability Committee. This further reduces the costs for the end users to interact with the DeFi yield protocols.
What’s Available and What’s Next?
In this release, we aim to demonstrate the feasibility and benefits of ZK Rollup for the layer2.finance use case. Just like any product powered by cutting-edge technology, we take a gradual launch approach for zk.layer2.finance. Initially, zk.layer2.finance supports Ethereum and Compound protocol with a 7-day “train-departing” schedule.
In the future, we will continuously refine the user experience and add more DeFi yield protocol integrations for users to choose from. More importantly, as Celer Network becomes a generalized blockchain interoperability protocol supporting 27 different chains, we aim to enable layer2.finance to support and lower the costs of cross-chain yield aggregation. Combined with Celer IM, layer2.finance will be able to synthesize multiple chains’ DeFi ecosystems into a single entry point in a non-custodial way. This allows users to stay in one chain and easily gain access to all other chains’ DeFi protocols at low cost by not only splitting L1 gas fee but also splitting costs for cross-chain/cross-layer transactions.
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