Will Yearn Finance Mergers Result in a Unified L2 Ecosystem?

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Will Yearn Finance Mergers Result in a Unified L2 Ecosystem?

Will the numerous mergers made by Yearn Finance in the past two months result in a gigantic DeFi ecosystem based on L2? According to one anonymous individual on Crypto Twitter, SushiSwap’s latest blog post indicates that the proposition might be true.

If so, we will see a Yearn enriched subset of DeFi filled with AMMs, money market protocols, insurance platforms, yield farming, projects, and much more.

In a Twitter post shared on January 9, user Dogetoshi connected two dots which imply that Yearn’s mergers are far more serious than we are led to believe.

A blog post revealed by SushiSwap recently states that the DEX protocol plans to ‘move in sync with the greater Yearn ecosystem.’ Moreover, the exchange seeks to integrate Zk-rollups as part of its layer 2 (L2) scaling solution.

While the decision still has to be made as to which L2 solution will be implemented, we still see that Yearn and other projects wish to fuel their growth by working together under one scaling protocol.

As such, it is highly possible for ZK-rollup to dominate in the future and establish a proven scalability layer before even Ethereum does.

Dogetoshi suspects that the process will result in even more protocols moving to Zk-rollup once Yearn Finance delivers its choice. With that in mind, DeFi users can expect almost all decentralized financial instruments to arrive in a scalable form in 2021.

What is ZK-Rollup?

ZK-Rollup represents one of the two main scaling solutions, besides Optimistic. It delivers an L2 scaling solution by hosting all funds in a single smart contract on the main chain.

Computation and data processing, on the other hand, is performed off-chain. Moreover, the tech relies on the use of zero-knowledge proofs which validate the information through side chains.

There are currently two main teams that work on creating ZK-Rollup, Matter Labs, and Starkware. The L2 scaling solution has the potential to produce and verify blocks in under a minute. Furthermore, it has a throughput of up to 2,000 TPS.

A scalability race has been running in DeFi since September last year. Scalability remains to be a major issue in the blockchain industry. To reach global adoption, developers have to create a solution for that problem.

Developers find it almost impossible to create a network that contains all three fundamental features of the blockchain trilemma.

For example, networks could be scalable and decentralized but they would lack security. If they were secure and retained decentralization, they would not be scalable.

Many enthusiasts have worked on finally solving the issue and making blockchains scalable. Ethereum 2.0 represents the first ‘real’ instance of a PoS-based scalable network, but it still has to fully launch.

Developers anticipate a final launch in December 2021, but DeFi is too impatient to wait that long. Because of that reason, many are working with Matter Labs to launch ZK-Rollup for protocols in the Decentralized Finance market.

For ZK-Rollup to work, a majority of protocols will have to use the same L2 solution. If the Yearn Finance mini-ecosystem discovers that the solution indeed works, it is highly possible for other developers to adopt this as well. While the final launch date remains unknown, the community anticipates H1 2021.

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Marko Mihajlović

Marko is a content writer passionate about cryptocurrencies, blockchain technology, geopolitics, and information security. After an internship at Cointelegraph in 2018, he decided to pursue writing about the field of decentralized technology full-time.

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