How to Use Layer-2 Solutions to Save on Ethereum Fees: Immutable X
The Ethereum (ETH) network has been struggling to scale, plagued with skyrocketing gas fees and slow transaction confirmation times. Following the explosion of decentralized finance (DeFi) and non-fungible tokens (NFTs) over the last two years, the strain on the network has become palpable, leading to the much-needed development of layer-2 scaling solutions to reduce fees and decongest the network.
Layer 1 is the blockchain itself, while layer 2 encompasses projects built on top of it.
Immutable X was released to solve Ethereum’s scalability issues for low-cost minting and trading of NFTs. Read on to learn more about Immutable X and how it addresses the scaling challenges on Ethereum pertaining to NFTs.
What is Immutable X?
The increasing popularity of NFTs has led to congestion on Ethereum, resulting in extremely high fees for simple transactions. Immutable X leverages layer-2 solutions to ease up the burden of transactions on the Ethereum network, helping it to scale.
Immutable X is the first layer-2 scaling protocol for NFTs on the Ethereum network. The protocol says it offers instant trade confirmations, increased scalability, and zero gas fees without compromising user custody. It intends to solve network scalability for NFTs by leveraging the power and security of the Ethereum blockchain while maintaining its integrity.
A collaboration between Immutable and Starkware aims to scale digital assets in an open decentralized environment.
How does Immutable X work?
The Ethereum NFT ecosystem faces several key challenges. Scaling is at the top of the list, with the network only being able to process a handful of NFT transactions per second.
The increase in NFT activity on-chain has led to network congestion and drastically reduced transaction speeds. Consequently, this has impacted ETH gas fees as users compete to confirm transactions, making the network slow and expensive.
High gas fees and long transaction times have resulted in a decrease in NFT trading activity on-chain and the NFT market expanding onto more affordable chains. Equally important are the technical limitations faced by NFT developers due to scalability and the controversy about the environmental impact of NFTs.
Immutable X counters these challenges by introducing two different layer-2 solutions known as ZK-Rollups and Validium. Under a ‘Volition’ model, users will be able to choose whether particular assets are held as Validium zk-proofs or ZK-Rollups.
Immutable X uses ZK-Rollups to process thousands of off-chain trades by creating proof that all these transactions are valid, and then publishing that proof on-chain, where it is verified by a smart contract. The validation of a transaction happens when the owners of the assets sign off on the transaction.
Since the Ethereum network still hosts the proofs in smart contracts, the security of the network is captured along with increased speeds.
Validium is similar to ZK-Rollups but differs in the sense that the resulting proof is not published on layer 1. While this serves to improve transaction speeds, it needs a trusted group to hold authority. It’s important to note that Validium is yet to be implemented.
Since transactions on Immutable X are not being processed on Ethereum layer 1 they are gas-free. This is a far cry from the exorbitant fees charged for on-chain transactions. Immutable X is able to process up to 9,000 NFT transactions per second as well as instant transaction resolution.
The instant resolution drastically improves the user experience of NFT trading and eliminates scaling challenges for NFT creators who want to mint their work on Ethereum.
Immutable X has a native utility token known as IMX that powers NFTs trading in its marketplace and can be staked to earn rewards.
Unlike the energy-intensive computations required to secure the Ethereum blockchain, Immutable X relies on staking to secure the protocol. Therefore, the layer-2 protocol expends less energy and is an environmentally friendly alternative.
How does Immutable X differ from other Ethereum layer-2 scaling solutions
Ethereum layer-2 solutions include State Channels, Plasma, and Optimistic Rollups. The protocols differ from immutable X in approach to solving the blockchain trilemma in sacrificing one of the three; decentralization, security, and scalability.
State channels use a scaling solution that allows users to make thousands of transactions off-chain but only submit an opening and a closing transaction on-chain. The intermediate states are signed by both parties to indicate assent. While this opens the door for free peer-to-peer transactions and higher layer-1 throughput, it also exposes the participants to counterparty fraud, especially if you rely on another person to represent you in a transaction.
On the other hand, ZK-Rollups process transactions in batches, then generate a ‘proof’ for that batch. Using this proof, rather than checking each transaction individually, you can check the entire batch outside.
Plasma uses smart contracts and Merkle trees to create multiple child chains. Through the use of fraud proofs, plasma chains directly inherit the security of the Ethereum mainnet.
However, unlike Immutable X, which offers instant transaction resolution, withdrawals from Plasma chains take up to two weeks — an exit period where users can report fraud. This dramatically impacts the system’s user experience (UX).
Optimistic Rollups use key actors known as aggregators to scale Ethereum layer 1 by compiling batches of transactions off-chain and sending them to a smart contract on the main chain through fraud proofs. This enables the network to achieve consensus on a batch of transactions as opposed to every transaction, consequently improving transaction speeds.
The downside of using Optimistic Rollups to scale NFTs is that there is no possibility for fast NFT withdrawals. Also, in the case the Optimistic Rollup is successful and holds a significant amount of value, they are prone to attacks.
In contrast, ZK-Rollups use validity proofs, rather than fraud proofs, to process the transactions on-chain and provide users with immediate confirmation that transactions are valid and immutable.
Who’s already using Immutable X?
Numerous blockchain games and NFT marketplaces have already adopted Immutable X to improve their user experiences. Here’s a list of decentralized apps (dapps) that are currently using Immutable X:
- Gods Unchained (NFT card game)
- My Crypto Heroes (NFT game)
- Crypto Assault (MMO)
- War Riders (MMO)
- Guild of Guardians (mobile RPG)
- MLB Champions Baseball (NFT collectibles game)
- OpenSea (NFT marketplace)
- Mintable (NFT marketplace)
- RTFKT studios (fashion NFT studio)
- SuperfarmDAO (DeFi NFT farm).
To learn more about how to reduce Ethereum gas fees using an L2 solution, check out our first piece about a layer-2 scaling solution, Arbitrum.
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