(IJCH) A Cure for What Ails Bitcoin and Ethereum - Layer 2 Solutions: The Pros and Cons

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IJCH - Inside JaiChai's Head (meaning: My warped, personal opinions and musings)

From the Author

Salutations. I am JaiChai. And if I haven't had the pleasure to make your acquaintance, it's always nice to meet a fellow Steemian.

"Big Dog Ailments"

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Bitcoin and Ethereum, while being the "Big Dogs" of the cryptocurrency world for quite some time, they are getting a bit long in the tooth.

In fact, Ripple has recently become #2 on coinmarketcap.com; mainly because it doesn't suffer from what ails Bitcoin and Ethereum.

Here are the major issues people are having with Bitcoin and Ethereum:

• Mining is becoming a dirty word in (and out of) the cryptocurrency space.

• Bitcoin and Ethereum have transaction fees (Bitcoin's fees are ridiculous); while many new and upcoming coins have no fees at all.

• Compared to many alternative cryptocoins, Bitcoin and Ethereum have very slow transaction times.

That's why more people are now turning to cryptocurrency that has no transaction fees and takes only seconds - not minutes, hours, or even days - to confirm.

"Layer 2"

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Using the OSI (7 Layers of the Internet) Model, here is the definition of "Layer 2":

Layer 2:

The data-link layer. This layer sets up links across the physical network, putting packets into network frames. This layer has two sub-layers, the Logical Link Control Layer and the Media Access Control Layer...

(http://searchnetworking.techtarget.com/definition/OSI)

It is in Layer 2 that Bitcoin and Ethereum will launch their solutions for all the previously stated problems (i.e., cost, speed, scalability, etc.).

Layer 2 is where Bitcoin's Lightning Network and Ethereum's Raiden Network will inhabit and operate.

The Benefits of Implementing The Lightning and The Raiden Networks (The Pros)

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The Bitcoin Lightning Network and the Ethereum Raiden Network aim to provide an off-chain solution to turbo-boost transaction speed, lower costs, and enhance scalabiliy.

They will do this by allowing the transaction participants to negotiate and agree on the fulfillment of contracts or the completion of their transactions on their own, off-chain.

That means only a handful of participants need to agree on the transaction, instead of the current, expensive and time-consuming "global" requirement.

This will drastically cut confirmation times because only the initial "opening" (creation of the payment channel between two parties) and the "closing" (final outcome of the transaction and destruction of the payment channel) needs to be put on the blockchain for transaction settlement.

Currently, all the parties' bloated signatures and intermediate transactions are required on the blockchain for transaction confirmation.

This data bloat clogs up the network.

The Lightning and Raiden Networks will trim that fat; freeing up block space for more transactions; hence, more transactions per block and faster transaction times at a lower cost.

Arguments against The Lightning and The Raiden Networks (The Cons)

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At the outset, these Layer 2 solutions appear like the perfect panacea for what ails Bitcoin and Ethereum - almost too good to be true.

But nothing is perfect and with every solution comes a cost.

First off, these solutions will require a person (or group) to host, cultivate, babysit and fix it when hiccups occur.

And babysitters are not free; which means both networks cannot be totally transaction fee free.

Granted, the fees will be much lower; but for many people - with many more people soon to join their ranks, especially when no-fee alternatives seem to be popping up left and right - any fee is unacceptible.

The requirement for hosting goes against the "Decentralization Manifesto" (meaning: centralization and its inherent potential for corporate shenanigans and incompetence).

Impressions

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The promises of Bitcoin's Lightning Network and Ethereum's Raiden Network will certainly ease much of the pain that plagues both their platforms and their users.

But to successfully launch and responsibly implement them - while preventing corporate mismanagement (AKA: corruption and over-centralization) and continually warding off attacks - will require a buttload of technically competent developers, thorough threat vector analysis, and several successfull cycles on each of their respective testnets.

It's no wonder that both solutions' launch dates are no longer set in stone.

And short of a governing body imposing regulations, both of these Layer 2 solutions will require, at the very least, a few watchdogs with integrity.

By JaiChai

Thanks for stopping by.

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About the Author

He is a retired U.S. Military veteran. Believing that school was too boring, he dropped out of High School early; only to earn an AA, BS and MBA in less than 4 years much later in life – while working full-time as a Navy/Marine Corps Medic.

In spite of a fear of heights and deep water, he freefall parachuted out of airplanes and performed diving ops in very deep, open ocean water.

He spends his days on an island paradise with his teenage daughter, longtime girlfriend and three dogs.

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