A growing number of DeFi use-cases on the Ethereum mainnet gave rise to many Layer 2 (“L2”) scaling solutions due to increased transaction costs. Each L2 solution brings its own mix of scalability, security and privacy to the off-chain L2 transactions, which ultimately settle on L1.
Provide Privacy is our solution enabling the Baseline Protocol by providing enterprise-grade zero-knowledge rollups on Layer 2. Our architecture for this solution is generalized and enables recursive proving and verification of succinct proofs under zero-knowledge across any polynomial commitment scheme. Our API also enables code-generated circuits, arbitrary code execution and a storage abstraction layer for off-chain proofs. Merkle trees are the first supported implementation for the proof store.
Connext enables a cross-chain liquidity network for fast swaps between Ethereum and compatible scaling solutions. This state channel protocol allows counterparties to transact with one another and enforce specific business logic off-chain. Once transactions accumulated within a state channel reach a certain volume, certain conditions are met or the parties simply wish to withdraw, the specific business logic is executed within the channel and settlement occurs on the networks involved in the swaps. Connext aggregates and nets-out the transactions taking place on-chain, reducing both network congestion and costs, and increasing transaction throughput.
We have identified an opportunity to reduce the noise circulating throughout the blockchain ecosystem regarding L2 solutions, so enterprises can focus on using DLT and the Baseline Protocol to create transformative enterprise value. That opportunity is to integrate Connext, to which we have been contributing since 2019, with Provide Privacy, to offer a value-added L2 with native support for zero-knowledge proofs and state channels under one unified architecture. Integrating state channels into our Privacy architecture unlocks a number of new use-case permutations and creates unprecedented composability across various liquidity providers, chains and assets.
We are exploring accumulating verifiable, baselined exit proofs in a state channel and generating a single recursive proof upon channel exit. The resulting recursive proof could then be used to verify the integrity of each member invoice and as the basis for minting a high-fidelity financial instrument such as an ERC-20 token. The enablement of this tokenization is quite useful to the broader DeFi ecosystem and will be essential if we are to unlock financial inclusivity.
Driving the Baseline Standard
While Layer 2 solutions are innovative, Provide and Unibright are ultimately driving the discussion around interoperability between Layer 1 and Layer 2 in the context of enterprise adoption. The Baseledger project and reference architecture will illustrate how to integrate a proper mainnet and L2. Prior to Baseledger, no other project aimed to coordinate Layer 1 and Layer 2 within a single, open architecture.