This week, Coinbase announced the creation of a new Protocol Team, described as “a dedicated/experienced group of engineers at Coinbase focused on contributing to scaling blockchains and community building.” Some of the early projects the Protocol Team will be working on will involve contributing to the Ethereum Foundation by building infrastructure for testing and being early testers, as well as building out Coinbase’s integrations with Ethereum Layer 2 (L2) scaling solutions. They’ve identified Polygon as their first target for L2 scaling.
Layer 2 scaling solutions for Ethereum are secondary projects that sit on top of the Ethereum blockchain and allow for more scalability and efficiency, all while letting you interact with the entire Ethereum ecosystem. Right now, moving between Polygon and Ethereum is a fairly complicated process; however, Coinbase wants to make it simpler for their customers, so no one misses out on the growing Ethereum ecosystem due to fees.
Presently, Ethereum is able to handle ~30 transactions per second and Polygon can handle ~4,000. Ethereum recently released an update that slightly decreased fees and they are working on a number of solutions to increase the transaction throughput, which would serve to further decrease said fees. Proof of Stake (estimated release in early 2022) is the most notable proposed solution, with more scaling solutions scheduled thereafter. Over the past few weeks, Ethereum has seen transaction fees occasionally dip into the hundreds as NFT and DeFi traffic increases.
The Takeaway: Coinbase has built a team to work on Ethereum scaling, both internally by building out support for Layer 2 solutions and externally by supporting the Ethereum Foundation’s development efforts.