Learn how to join Bybit's VIP Program, where you can realize exclusive benefits — from up to 50% off trading fees and tailored interest rates to instant OTC trades up to $10M.

With the Bybit VIP Program, you can realize exclusive benefits — from up to 50% off trading fees and tailored interest rates to instant OTC trades, Bybit Card cashback and more. Joining the ranks of the very best traders on the platform will boost your profitability, raise your limits and offer access to VIP-only perks.

 and guides you through the steps to become a VIP trader and unlock exclusive benefits. Let's get started!

 is an exclusive club for the most esteemed traders in the crypto market. It’s designed to provide members an enhanced Bybit experience with numerous VIP-only benefits and perks. The program aims to reward avid traders who have high volumes, account equity levels and borrowing activities.

The Bybit VIP Program offers a multitude of benefits for members. These range from discounted trading fees and high limits for withdrawals and application programming interface (API) trades to priority Bybit customer support access, relationship managers and exclusive VIP events and meetups. You can find the full list of VIP exclusive benefits 

Requirements to Become a Bybit VIP Trader

You’ll need to fulfill a specific level for one of the criteria below to become a VIP trader on Bybit:

Bybit's VIP Program features six distinct tiers: 

. Each successively higher tier offers greater rewards, and also comes with more stringent qualification requirements. For instance, as a 

 trader, you’ll enjoy reduced trading fees, such as 0.03% for makers and 0.045% for takers in the spot market. To qualify for this exclusive tier, you must meet at least one of the following criteria:

Once you become a VIP trader, you must continuously meet the above criteria to maintain your Bybit VIP status and keep enjoying the benefits. 

However, this doesn't mean your account will immediately lose its VIP status and revert to standard after a single day in which you don’t meet the requirements. Bybit offers a 14-day grace during which you can continue enjoying VIP perks and benefits, even if you no longer meet the program's conditions. If the criteria are not met by the end of this period, your VIP status will automatically be revoked. However, if that occurs, you can regain your status by fulfilling the requirements for any VIP tier either during or after the grace period. When this happens, Bybit will grant you a new 14-day grace period.

How to Sign up to Become a Bybit VIP Trader

In the following section, you'll find a step-by-step guide that shows you how to join the Bybit VIP Program.

The first step to becoming a VIP trader is to open a Bybit account (if you haven't already done so). Simply 

 and fill out the form with your details. After registering, you’ll need to verify your account to enjoy the platform's full functionality.

Next, fund your Bybit account with crypto or fiat currency.

You can deposit cryptocurrencies by using the 

 menu. On the page, choose your desired coin and the blockchain where you'll be depositing the assets. To avoid any loss of funds, please always ensure that you're transferring crypto from the correct chain.

Next, copy-and-paste the wallet address displayed on the page, or scan the QR code with your smartphone's camera, and initiate the deposit from your wallet. After a few confirmations, your cryptocurrencies will be credited to your Bybit account.

To fund your Bybit account with fiat currency, click on the 

 button and select one of the available services (e.g., 

 service, choose a fiat currency, the deposit amount and one of the available payment methods. After clicking on 

, follow the instructions displayed on the next pages to initiate the transaction. Your funds will be credited to your Bybit account, with processing times varying according to your chosen service and payment method.

After you have a verified Bybit account funded with either crypto or fiat, perform eligible activity on the platform until you qualify for VIP status (see table below).

You can achieve VIP status by fulfilling a minimum level of VIP 1 in either of the following categories (

After becoming a VIP trader on Bybit, don't forget to maintain your VIP status to continue enjoying the exclusive perks and benefits.

If you have active VIP status at another crypto exchange, or your total MT5 trading volume meets Bybit's VIP criteria, you can apply for a VIP+2 upgrade. This upgrade will grant you VIP status on the platform — and instantly elevate it by two levels. (Please 

 that Bybit only considers 10% of any MT5 forex trading volume.)

 and submit your 30-day trading volume on your current exchange. Bybit’s VIP team will review your application, and a Relationship Manager will contact you if you're eligible for the VIP upgrade.

How to Get Started With a 20-Day Bybit VIP Trial

Another way to qualify for VIP status on Bybit is through a 20-day trial. Instead of fulfilling the requirements of the VIP 1 level, simply fund your account with $50,000 to enjoy the exclusive benefits of the program for 20 days with a VIP Trial Card (issued one day after your deposit). The VIP trial offer is available to users who haven't used a trial within the past two months.

To unlock the 20-day VIP trial, head to the 

 menu on Bybit and use one of the available payment methods to fund your account with $50,000 in assets.

With VIP Level-Up Tasks, you can earn generous bonuses as high as 6,000 USDT. You can claim rewards for Level-Up Tasks for five VIP levels (VIP 1, VIP 2, VIP 3, VIP 4 and VIP 5), with higher tiers offering greater bonuses upon completion.

If you're eligible, you’ll see a pop-up window with VIP Level-Up Tasks after you log into your account. To claim your rewards, complete the specified trading volume requirement within 14 days of receiving the task, and click on the 

 page. You can learn more about Bybit VIP Level-Up Tasks

Exclusive Trading Benefits Offered to Bybit VIPs

As a member of the Bybit VIP Program, you can unlock exclusive benefits to supercharge your trading experience. Among these are discounted trading fees (which can significantly boost your trading revenue), profitability and chances of winning trades.

In addition to discounted trading fees, you’ll also enjoy substantially higher API trading and withdrawal limits. While the former is restricted to 10 trades per second for non-VIP users, you can take advantage of up to 120 API trades per second as a VIP trader. Simultaneously, your daily withdrawal limit is increased from the basic 1 million USDT to as high as 12 million USDT.

 is an exclusive club that provides an enhanced service experience for the most esteemed traders. As a member, you can access a multitude of exclusive benefits and perks, such as the following:

Are you ready to supercharge your trading experience? 

Intermediate

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How to Become a Bybit VIP: Your Guide to Exclusive Benefits

LETSTOP is a drive-to-earn mobile app that monitors phone distractions while driving. Learn more about how it works in this article.

Smartphone distractions have created an unprecedented road safety crisis worldwide. 

: texting behind the wheel makes drivers six times more likely to crash than drunk driving does — yet millions of drivers still use their phones while operating vehicles.

This article explores how LETSTOP is transforming safe driving into rewarding experiences through blockchain technology. We'll examine its drive-to-earn model, reward system, tokenomics and potential as both a road safety solution and an investment opportunity.

 is a drive-to-earn mobile app that monitors phone distractions while driving. Users earn STOP tokens for phone-free driving through a gamified system that transforms daily drives into rewarding experiences.

A life-changing car accident caused by a distracted driver running a red light inspired LETSTOP co-founder Almog Nissan to reimagine road safety. Together with co-founder and CEO Dor Levy, they envisioned rewarding safe driving, rather than just punishing dangerous behavior.

The founders built a platform that combines automotive technology, cryptocurrency and AI to revolutionize road safety through rewards. This innovative approach has quickly gained traction, with over 50,000 users logging over 3 million kilometers of safe driving since the app’s launch.

Distracted driving claims thousands of lives annually, with 

, of which 9% are directly linked to phone use. LETSTOP aims to tackle this crisis as follows:

Each of these objectives works harmoniously to support LETSTOP's ultimate mission of transforming road safety into a rewarding experience that benefits both individual drivers and society.

The LETSTOP app operates through a sophisticated system that monitors and rewards safe driving through the following apps and features:

The result is a dynamic system in which better driving habits unlock greater earning potential.

The following five core features power LETSTOP's drive-to-earn ecosystem.

LETSTOP uses a dynamic 40-level system to make safe driving rewarding. As drivers earn XP through distraction-free journeys, they advance from Level 1's 2% bonus toward Level 40's 70% boost. Through this gamified approach, daily commutes become opportunities to climb the ranks while building safer driving habits.

LETSTOP Credits are the core currency of the platform, earned directly through safe driving achievements. Earning rates directly scale with user level, vehicle type and subscription tier as follows: PRO subscribers enjoy unlimited earning potential, while PLUS and LITE tiers are capped at 300 and 150 monthly credits, respectively.

In the STOP Store, users invest their earned credits into virtual cars with unique earning multipliers. From the basic model's 2% bonus to the Jazzster GN's 150% boost, each vehicle offers different strategic advantages for maximizing rewards.

Beyond vehicles, the store features mystery boxes containing rewards from 10 to 450 credits, as well as car upgrades and subscription boosts. Users can also access a voucher marketplace to redeem credits for real-world rewards through LETSTOP's partnership network.

LETSTOP's triple-boost system combines vehicle multipliers for immediate earnings acceleration, a level-progression system for sustained growth and a 5% referral program for community expansion. Premium membership unlocks enhanced benefits across three tiers, while special events create time-limited opportunities for increased rewards.

The platform's comprehensive rewards system operates across three membership tiers, each one tailored to different user needs. LETSTOP PRO (at $9.90 monthly) offers unlimited credit earning potential and exclusive benefits. The PLUS tier provides a balanced option at $4.90 monthly with a 300-credit earning cap, while the free LITE tier allows users to earn up to 150 monthly credits.

Beyond direct earnings, the rewards system incorporates partner vouchers, cryptocurrency conversion options and community features, such as leaderboards. Achievement rewards recognize milestones in users' safe driving journeys, while the upcoming cryptocurrency integration will allow users to convert their efforts into tradeable STOP tokens.

LETSTOP has shown consistent progress, with the following key milestones already achieved:

Looking ahead to 2025, LETSTOP plans to implement the following key developments:

These developments aim to strengthen LETSTOP's position as a leader in drive-to-earn while furthering its mission to enable safer roads worldwide.

STOP is an SPL token built on the Solana network. It’s designed to bridge safe driving behavior with cryptocurrency rewards. The STOP token implements an annual halving mechanism to ensure long-term value preservation, similar to Bitcoin's model, but accelerated to align with the project's growth trajectory.

STOP has a max supply of 100 million tokens, to be distributed in the following manner:

The growing adoption of LETSTOP's drive-to-earn app and its impact on road safety directly influence STOP's price trajectory. While cryptocurrency forecasts remain speculative by nature, multiple price analysis platforms project the following for STOP:

These forecasts suggest a positive long-term outlook for STOP, driven by the growing drive-to-earn sector and LETSTOP's innovative approach to road safety. However, STOP's future value will ultimately depend upon user adoption, platform development and broader market conditions.

Looking to trade LETSTOP tokens? Bybit now offers the STOP/USDT Spot trading pair. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency and navigate to the 

STOP shows promising potential in the drive-to-earn sector, though investors should carefully weigh both its strengths and potential risks before making investment decisions.

While STOP's innovative approach to road safety and its strong initial traction distinguish it in the market, potential investors should 

 and invest no more than they can afford to lose.

As smartphone distractions continue to endanger lives on roads worldwide, LETSTOP offers an innovative path forward. Through its innovative drive-to-earn model and STOP token ecosystem, the platform transforms daily commutes into safer roads and user earnings opportunities, showing how digital innovation can effectively “drive” positive behavioral change.

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LETSTOP (STOP): Turning Daily Rides Into Profitable Journeys

FDUSD, a stablecoin from First Digital Labs, is now live on Sui as a native token, joining other stablecoins like USDC and AUSD.

The S&P 500 ended flat amid mixed earnings and geopolitical concerns, as investors awaited Thursday's data and Fed commentary. Coindesk Indices, an index measuring broader cryptocurrency market performance was up by 2.01%, with Bitcoin rising by 1.91% and Ether dropping by 0.59%, in the past 24 hours.

Today's top performer is LUMIA, which surged 16.1% following the announcement of its partnership with Cobox to bridge real-world assets and virtual ownership.

Lumia (LUMIA), founded in 2024, is a Layer 2 blockchain solution leveraging the Polygon CDK to enhance scalability, liquidity, and interoperability. It addresses challenges like data availability and cross-chain interactions by incorporating AvailDA for decentralized data and Polygon AggLayer for cross-chain functionality, enabling efficient and flexible dApp development. 

 to integrate real-world assets (RWAs) into its immersive, player-owned universe. This collaboration aims to enhance asset liquidity, trading, and gameplay experiences, bridging digital and physical realms for more tangible and vibrant virtual ownership.

Check Out the Latest Prices, Charts, and Data of 

, a stablecoin from First Digital Labs, is now live on Sui as a native token, joining other stablecoins like USDC and AUSD. This launch reflects growing institutional confidence in Sui, which has seen significant growth in TVL and DeFi volume. FDUSD, backed by reserves in Asian banks and US Treasury debt, offers DeFi users a reliable, US Dollar-pegged stablecoin, bridging traditional finance and cryptocurrency ecosystems.

Yesterday, the total flow into Bitcoin Spot ETFs is $146.9 million, with $0 million in GBTC and $146.9 million in non-GBTC products.

: the Spotlight Badge, which requires minting through the Spotlight Protocol and joining a Spotlight circle; the Impossible Finance Badge, which involves completing social tasks, claiming the TIDIA faucet, staking TIDIA on Impossible Finance, and then claiming the badge; and the SNGLR Badge, where users connect their wallet, follow artists, mint IP assets, tweet, and provide personal details to claim their badge. More badges are coming soon!

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FDUSD Launches as Native Stablecoin on Sui, Strengthening DeFi Ecosystem

Morpho (MORPHO) is an efficient Ethereum-based protocol revolutionizing decentralized lending with customizable peer-to-peer and pool-based solutions.

Liquidity pools have revolutionized decentralized lending and borrowing by offering a wide choice of product options and significant liquidity levels. For several years, protocols like 

 (COMP) have been lauded as true innovators that introduced a real game-changer: pool-based lending and borrowing. However, a closer look reveals that things aren’t as efficient and smooth as they may seem within the world of crypto lending. The problem is that lending pools on decentralized protocols often have mismatches between lenders and borrowers, with the former substantially outnumbering the latter. As a result, lenders earn only meager 

s, while borrowers pay exorbitant fees to access funds via these pools. Another critical problem is the lack of customizability in lending and borrowing products, with many protocols adopting a one-size-fits-all approach.

Morpho (MORPHO) is a decentralized protocol on 

 (ETH) that aims to improve the efficiency and flexibility of crypto lending and borrowing by offering a unique model that combines the elements of 

 (P2P) and pool-based matching of lenders and borrowers. To be precise, one of Morpho's essential products, Morpho Optimizers, specifically focuses on P2P matching, with pool-based lending and borrowing used as a fallback option. Morpho also offers users an excellent level of customization for creating new lending markets through its core protocol.

With its innovative lender-borrower matching mechanism and highly customizable and flexible markets, Morpho greatly improves capital allocation and transaction efficiency in the 

 (MORPHO) is an Ethereum-based decentralized lending protocol that offers a unique P2P order matching mechanism to improve the efficiency and affordability of 

 The platform also enables users to create efficient lending markets with highly customizable lending and borrowing parameters. Additionally, it offers a product, Morpho Vaults, for curated lending at varying risk levels.

, a France-based software development company founded in 2021 by Merlin Egalité and Paul Frambot. It's also supported by the nonprofit 

As its first major product, the project launched Morpho Optimizers on the Ethereum blockchain in 2022. Morpho Optimizers is designed as an add-on solution for lending pools on Aave and Compound to help match individual lenders and borrowers. The transacting parties can benefit from a more efficient lending process than with the default pool-based mode.

In January 2024, the project launched Morpho Blue, later rebranded to Morpho, a solution to help users create highly flexible lending markets with custom parameters and options. Morpho acts as the backbone of the Morpho ecosystem, and the project team has turned its focus to promoting and further developing this product. At the same time, Morpho Optimizers remains an integral part of the platform's core offering, albeit in a less prioritized state than Morpho.

The Morpho protocol consists of three main products — Morpho, Morpho Vaults (based on the underlying protocol) and the legacy Morpho Optimizers. Morpho allows users to create individual lending markets by specifying their preferred options for the following key attributes:

All these parameters are highly customizable, with minimal interference from the Morpho governance mechanism. Some parameters do have to conform to certain requirements; e.g., the IRM and LLTV must be from the list approved by the protocol's governance.

Morpho's high level of customizability is a significant departure from the typical model used on decentralized lending and borrowing platforms. On most other protocols, there are fixed parameters governing the lending and borrowing process; e.g., only certain collateral assets, lending assets or LLTV rates are allowed. In contrast, Morpho lets you customize all of these options, giving lending market creators an unmatched degree of freedom. The protocol offers the following key benefits to users, developers and market operators:

While Morpho is currently the platform's flagship product, the legacy Morpho Optimizers continues as a key offering in the platform's product line. Morpho Optimizers are add-on layers to the Aave and Compound lending pools. They can be used to facilitate a peer-to-peer match between lenders and borrowers. Since typical lending pools — including on platforms like Aave and Compound — are often heavily skewed with more lenders than borrowers, both parties end up paying excessive fees. Borrowers have to confront high costs due to the need to service the many lenders in the pool. In turn, lenders fight for the meager scraps left over from insufficient numbers of borrowers.

By using a P2P matching mechanism, Morpho Optimizers effectively takes the lender and borrower away from pool-based interaction and establishes a direct relationship between them. This allows users to borrow assets at cheaper rates, while also delivering better APYs for lenders. If either party withdraws from the direct lending relationship, both parties have the option to use the standard lending pools on Aave and Compound as a fallback.

The platform's third core product, Morpho Vaults (covered in more detail below) utilizes the underlying protocol and provides a way to lend through carefully curated market options at different risk profiles. This can suit lenders who are less proficient in using fully customized markets, but still prefer to take advantage of the lending opportunities offered by Morpho.

In order to create a custom lending market on Morpho, you need to have some technical proficiency and, preferably, knowledge of Solidity, the programming language that the protocol uses for its smart contracts. As noted earlier, developers can create a custom market by supplying five base parameters — a collateral asset, an asset offered for lending, an oracle, a preferred IRM and an LLTV. The first four of these normally require an Ethereum smart contract address to be specified. For the collateral and lending assets, these are the addresses for the tokens' contracts. The selected oracle is also usually established via a pointer to its smart contract address, although oracle-less hard-coded prices for the collateral and lent assets are acceptable. Morpho also maintains Ethereum addresses for each IRM whitelisted by the protocol's governance; developers can use these when choosing a preferred IRM.

The last value, LLTV, is a hard-coded figure that defines the threshold beyond which a loan becomes unhealthy due to its poor 

. Liquidators on Morpho are protocol actors who are incentivized to cover bad debts in return for collateral, similar to the method used on many other lending platforms. They’re allowed to liquidate up to 100% of the debt. In return, liquidators receive the debt's collateral, as well as an additional incentive for their work.

Since Morpho is an oracle-agnostic protocol without a built-in oracle, each market can have its own oracle that sources prices for the collateral and lending assets from external sources. Developers are completely free in that regard, and can even hard-code asset prices for the market if they don't wish to use a price oracle at all. Naturally, an oracle is preferred for maintaining the most up-to-date and dynamic pricing information.

The IRM used is the only base parameter with which developers are somewhat restricted in their choice, as only whitelisted IRMs are allowed for a market. As of mid-November 2024, there’s just one whitelisted IRM that market creators can specify — the 

. This model dynamically adjusts interest rates to maintain the proportion of borrowed funds to supplied funds at close to 90%.

Morpho Vaults are a tokenized vault product that offers curated lending opportunities with varying pre-programmed risk parameters. Each vault is associated with a single loan asset, and can allocate deposits across multiple Morpho markets, thereby leveraging the overall liquidity available on the Morpho protocol. Morpho Vaults suit lenders who prefer predictable risk management over the uncertainty of completely custom markets. Each lender can earn APY rates commensurate with their chosen 

There is no limit on the number of vaults you can open on Morpho. Thus, you might even allocate funds to different vaults with significantly different risk levels to diversify your exposure.

Morpho Vaults' curated nature eliminates the need for users to spend time researching and evaluating individual markets' risk levels and return opportunities, as risk exposure is actively managed by the vault.

Since the vaults are connected to the underlying protocol, and source liquidity from it, they’re dynamically rebalanced, which helps optimize yields. Thanks to their permissionless and immutable nature, the vaults are also completely transparent. Moreover, they’re noncustodial, granting users full control over their deposited assets, which can be withdrawn at any time.

A lender deposits an asset into a Morpho Vault and receives shares of the vault as confirmation of their investment. The vaults themselves are tokenized products utilizing Ethereum's 

 standard, designed to represent tokenized vaults for yield-bearing assets. Each vault may be owned by a 

 (DAO), an individual DeFi expert or some algorithm maintained by a DeFi platform. A vault can be owned by only one entity. The owner may specify additional roles/entities for managing the vault. These roles can include one curator, one guardian and multiple allocators.

The curator is a party who sets certain limits, rules and boundaries for the vault, such as specifying asset supply limitations and enabling/disabling specific markets. Curators are instrumental in maintaining appropriate risk levels for their vaults. Assets that lenders lock in a vault are supplied to the protocol's underlying markets, based on curators' whitelists. There can only be one curator for each vault.

The role of guardian is a key vault position. A guardian protects the integrity and security of the vault. Guardians can revoke any action by the vault owner (or other entities) if they consider it to be against the interests of vault lenders. Each vault can only have one guardian, typically a DAO consisting of vault depositors.

Allocators are protocol actors whose job is to rebalance the liquidity utilized by Morpho Vaults to optimize interest rates and accessible liquidity. An allocator’s job is to rebalance and optimize the total liquidity, either manually or using bots, to best meet the needs of Morpho borrowers.

Morpho Vaults' operations aren't regulated by the protocol's governance mechanism. Each vault owner is responsible for their vault's governance model. Specific roles, such as the curator and the guardian, are designed to help in establishing transparent and secure governance procedures for a vault.

What Is the Morpho Crypto Token (MORPHO)?

The platform's native cryptocurrency, MORPHO, is envisioned as a 

. Holders of MORPHO have the right to participate in decision-making on the platform's future direction, general rules, deployment of smart contracts and allocation of funds from the treasury. Although Morpho promotes lending and borrowing markets that operate with minimal interference from the protocol's governance community, there are some general guidelines and rules through which the community needs to establish certain standards, minimum requirements or whitelists. MORPHO token holders are instrumental in this process.

The original MORHPO token was launched on Ethereum in June 2022 with a supply cap of 1 billion. However, there were limitations to the original token contract that negatively affected its functionality. Specifically, the token wasn't designed to facilitate efficient on-chain voting. As a result of these limitations, the project decided to relaunch the token, now on an upgraded contract. The new reincarnation of MORPHO will offer better functional capabilities, including more efficient on-chain governance processes. 

As of the time of writing on Nov 17, 2024, the project team has yet to deploy the new token. The new MORPHO will also be a supply-capped crypto, with a maximum and total supply of 1 billion. The token's supply distribution shares are shown in the chart below.

 token before its market launch. Bybit Pre-Market Trading is an over-the-counter (OTC) trading platform that provides access to promising new cryptocurrencies before their listings on the Spot market. The key advantage of the platform is the ability to access cryptocurrencies at desirable rates before the broader crypto market affects their prices.

Bybit's carefully designed curation process ensures that only crypto assets with solid potential and fundamentals are whitelisted for Pre-Market Trading. This saves you the time required to investigate each cryptocurrency, and reduces the risk of investing in scam projects. Naturally, you’re also encouraged to 

 on crypto assets you might consider purchasing through Bybit Pre-Market Trading.

Morpho represents a unique and potentially highly effective approach to DeFi lending and borrowing. The platform's facilitation of isolated and highly customizable lending markets gives DeFi users unmatched freedom in terms of choice and variety. In addition, users who prefer the stability of curated and well-defined risk profiles can take advantage of Morpho Vaults for more predictable yields. The use of the overall underlying protocol liquidity along with entities such as allocators makes Morpho Vaults particularly effective at optimizing lending and borrowing costs.

While custom lending markets launched via the protocol are now Morpho's key focus, the legacy Morpho Optimizers also continue to offer value. P2P matching of lenders and borrowers as an add-on to the standard pool-based mechanism is a functionality many DeFi users will find helpful. Morpho Optimizers can offer lenders and borrowers active on Aave and Compound an alternative and highly effective way of conducting their operations.

With this arsenal of innovative and unique products, the Morpho protocol is quickly shaping up as a leading platform in the lending niche of the DeFi industry.

Advanced

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Morpho (MORPHO): Leading Efficient, Permissionless Crypto Lending

Bybit Learn

Blockchain

A Layer 2 blockchain is built on top of a main blockchain system. The Ethereum upcoming Dencun upgrade is likely to impact L2 blockchains. Learn more here.

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 are one of the most promising concepts in the crypto community. Many developers believe this technology can solve scalability issues and make blockchain usage significantly more affordable. 

Why are Layer 2s so important? Explore this guide to see how they work and to learn more about their exciting applications.

A Layer 2 blockchain is a secondary blockchain that’s built on top of the main blockchain system. It uses the main chain's security and other features while its own separate framework expands the system's capabilities.

Layer 2 blockchains were designed to solve the 

, which refers to the difficulty of making a network that’s simultaneously secure, decentralized and 

. A Layer 2 blockchain works to address the so-called trilemma by adding scalability to the network.

Layer 2s add a whole new space for processing transactions on a blockchain. Since a Layer 2 blockchain is built on the main chain, it inherits all of the main chain’s security and decentralization. Thus, it can perform extra transactions at a quicker speed so the network doesn't get congested as more users join.

This feature makes Layer 2 blockchains an essential part of modern 

 development. When so many people are relying on blockchains to store data, execute multiple transactions and provide security, scalability is in high demand. Chains with a Layer 2 can provide their users with additional speed and lower transaction fees.

A Layer 2 blockchain enhances scalability by changing how transactions are processed. When you use a Layer 2 blockchain, your transactions are first processed on it. Layer 2s use a variety of 

 for verifying these transactions as they occur. However, transactions aren’t fully confirmed until they’re posted on the main chain. To finalize transactions and transfer assets, there are occasional cross-chain communications whereby the Layer 2 blockchain will post performed transactions on the main chain.

Different types of Layer 2s handle blockchain tasks differently. Following are some of the common mechanics currently used by certain types of Layer 2 blockchain projects.

A rollup is essentially a type of bundled transaction. Instead of requiring the main chain to handle each transaction as it happens, a Layer 2 blockchain can collect and process several similar transactions before sending them all to the main chain at once. 

, even take the off-chain processing one step further by verifying the transactions with a 

 and then providing the validity proof to the main chain to finalize the transaction. Rollups improve transaction throughput because the main chain only has to look at a single block of transactions, making it easier to validate transactions. Most rollups don’t have a separate consensus mechanism. Instead, they just use the consensus mechanism of their parent chain.

Sidechains have even more independent operations than rollups. They run parallel to the main network while still operating on the same code or computational engine as the main chain. Sidechins often use their own consensus mechanism, without needing permission from the main network. They simply connect to the main chain occasionally to pass assets back and forth between the chains. In addition to having a separate consensus mechanism, sidechains usually have their own tokens and protocols.

 is a type of scaling solution that uses validity proofs to verify multiple off-chain transactions. These smart contracts rely on 

 to finalize transactions. If there’s an invalid transaction, the proof won’t let the transaction progress to the main chain. If it is in fact a valid transaction, the knowledge that all data is correct goes to the main chain, while the underlying transaction data is stored off-chain. The simple verification of validity proofs allows a smart contract to be executed on the main chain without requiring excessive amounts of data transfer.

Like any other blockchain feature, Layer 2 blockchains work well in some situations but can cause problems in others.

Following are the benefits of a Layer 2 blockchain.

Following are some disadvantages of a Layer 2 blockchain.

As soon as the Layer 2 concept was introduced, blockchain developers began experimenting with it. There are now countless Layer 2 blockchain options available for processing transactions. Following are some of the 

 stands out because it's governed by a decentralized autonomous organization (

). This community-led Layer 2 system on Ethereum has a modular structure. People can operate on different levels, depending upon the level of security and the type of transaction they need. It has many tools for deploying smart contracts, so it's popular with hands-on users.

Unlike many other Layer 2 blockchain projects, 

 isn’t attached to a single chain. Instead, it's a customizable rollup architecture that can be used on multiple blockchain networks. Developers can use Eclipse to deploy Layer 2 rollup services on systems like Celestia, 

. People can create rollups for all sorts of projects and find an off-chain scalability solution that suits their unique needs.

 that treat every transaction as valid. Transactions are only rolled back if they get fraud proofs that identify an invalid transaction, so the network doesn't have to spend a lot of time manually confirming blocks. This consensus mechanism requires people to provide a stake for each new block, so it maintains security even without extensive verification or time spent looking for fraud proofs.

 has an impressive speed of 40,000 transactions per second, and features very low fees. Its scaling solution 

 to create a streamlined and convenient system, and is a favorite with DApp developers, who can code on it with the 

 is one of the most popular Ethereum Layer 2 scaling systems. This Layer 2 blockchain makes it easy to develop new programs. Polygon is used for many different DApps and payment channel projects, and developers can also use Polygon’s software development kit to build their own sidechains.

 operates on Bitcoin. The Layer 2 blockchain provides a simple way for people to experience faster transactions in exchange for crypto micropayments. Though Lightning Network is fairly simple, it's the backbone of countless Bitcoin transactions. The option of selecting different payment channels based on desired transaction speed is quite useful.

How Will the Upcoming Ethereum Dencun Upgrade Benefit Layer 2 Projects?

The Ethereum blockchain is already known for its unusually high level of Layer 2 blockchain projects. A new update to Ethereum may provide even more opportunities for Layer 2 developers. The Cancun-Deneb Upgrade, also known as EIP-4844 (or more informally as “Dencun”) will introduce a foundation for a type of scalability called Danksharding. The 

 available in the Dencun update will provide a versatile, short-term data storage method that makes it easier to perform rollups. Layer 2 projects can benefit in many ways from the Dencun update.

Ethereum’s new Dencun system revolves around the concept of "blobs." Short for “binary large objects,” blobs are short-term data modules that allow rollups to temporarily use data without having to pay to permanently store all the data on the execution layer of the main chain. This greatly increases storage capacity so the network can handle more transaction data. It also makes it simpler to transfer data so the network can improve transaction throughput while maintaining its security guarantees.

The main reason users are so excited about the Dencun update is that it promises to lower gas fees on the main Ethereum blockchain. Since Proto-Danksharding encourages more Layer 2 development, it can help to move unnecessary transactions off of the main chain. This reduced transaction throughput results in lower transaction fees for all users whether or not they take advantage of the new rollup and data storage system.

One of the most impressive ways that transaction fees will be lowered is during transfers between 

, as it will become vastly cheaper to take information from a Layer 2 blockchain and transfer it to the main chain. Experts estimate that rollup transaction costs may cost less than $0.001 per transaction, making it possible to create a highly affordable payment channel so users can send transactions back and forth while paying barely any fees.

Proto-Danksharding uses a modular approach to data storage. The data needed for transactions can be broken down into “blobs” for storage, so users can access necessary data without needing to look at entire blocks. This enhanced data availability will allow people to use blockchains for a variety of web3 development projects. Currently, Ethereum isn’t a fully modular system, but this update paves the way toward increased modularity.

With their ability to provide scalability and affordability, Layer 2 blockchain networks appear to many observers as the future of blockchains. In just a few years, they've transitioned from an occasional novelty to an essential part of web3 development. There are payment channels, DApps and much more built on Layer 2 blockchain concepts. Not only are more and more smart contract projects operating on Layer 2s, but Layer 2 systems are increasingly being created to assist with these projects.

In addition to becoming more prevalent in the future, Layer 2s seem to be moving in a few specific directions. Especially with Ethereum's focus on 

 and Danksharding, it's likely that new Layer 2 blockchain projects will begin to prioritize modularity. 

Another trend to watch is that of enhanced security measures. Though Layer 2s get some built-in security from their underlying blockchains, options such as optimistic proofs often sacrifice security for speed on the second layer. Some projects are moving away from this approach and trying to create stronger security guarantees for their Layer 2 blockchain systems.

With their capacity to manage multiple off-chain transactions, Layer 2 blockchains can lower transaction fees, enhance transaction throughput and increase transaction speed. By using the architecture of their underlying blockchain, they can ensure users still enjoy a reliable and familiar experience. As demand for processing multiple transactions quickly increases, Layer 2 blockchains are likely to become an essential part of the blockchain universe.

Layer 2 Blockchain: Exploring the Extent of Its Scalability

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