Layer-2 Blockchain Scaling

Blockchain technologies offer a foundation to dramatically expand the scope and freedom of global information sharing and value transfer. We envision a future with blockchain-powered decentralized ecosystems where people, computers, mobile and IoT devices can perform secure, private, and trust-free interactions at a massive scale. However, just like how the 56Kbps dialup Internet in the 90s cannot possibly support 4K video streaming, the insufficient scalability of layer-1 blockchains is the key factor limiting its use cases.

Layer-1 blockchains such as Bitcoin and Ethereum are slow because each operation needs to be processed by most of the nodes to reach on-chain consensus, which is exactly “how to build a super slow distributed system” every CS student learned from their Computer Systems 101. On-chain consensus also has severe implications on privacy, because all transactions are permanently public. New on-chain consensus improvements such as sharding and various Proof-of-X mechanisms are continually getting proposed and developed. They make the layer-1 blockchains relatively faster with different tradeoffs but cannot change the fundamental limitations of on-chain consensus.

To enable Internet-scale blockchain systems with better privacy and no compromise on trust or decentralization, we have to look beyond on-chain consensus improvements. The core principle of designing a scalable distributed system is to make operations on different nodes mostly independent. This simple insight indicates that the only way to fully scale out decentralized applications is to bring most of the transactions off-chain, avoid on-chain consensus as much as possible and use it only as a last resort. Related solutions are often referred to as layer-2 scaling technologies, which include state channel, sidechain, rollup, etc.

State Channel

A state channel allows mutually distrustful parties to execute a smart contract off-chain and quickly settle on the latest agreed states, with their security and finality guaranteed by on-chain bond contracts. Parties involved in the off-chain transactions cooperatively maintain a multi-signature fraud-proof replicated state machine, and only resort to on-chain consensus when absolutely necessary (e.g., when channel peers disagree on a state).

State channel was initially introduced by the Lightning Network to support high-throughput off-chain Bitcoin micropayments. Then the technology was extended on Ethereum (by Celer, L4, Magmo, FunFair, etc.) to support arbitrary off-chain smart contract state transitions such as generic conditional payment, multi-party game move, second-price auction bid, high-frequency atomic token exchange, etc.

Previous works on state channel networks have been facing a few significant challenges in terms of performance, robustness, scalability, flexibility, and cost-efficiency. This site provides an in-depth description of how Celer Network meets these challenges and builds the first large scale state channel network in production.

Sidechain

Another important off-chain scaling technique is the sidechain. The core idea is to run another more efficient decentralized system (with its own validators and operators) that can bridge assets to and from the mainchain. A sidechain can be either custodial (with its own decentralized trust) or non-custodial (such as Plasma). The main benefits of sidechain over state channel include that it is more friendly to interactions among many participants, and it does not require significant liquidity lockup or high user availability for the security guarantee. The major downside of sidechain over state channel is longer latency and higher cost for off-chain transactions.

Sidechain and state channel are complementary to each other. This site will also describe how Celer Network uses sidechain technology to build highly reliable and decentralized services that eliminate the state channel security risks and usability hassles caused by the state channel off-chain user availability challenge.

What is Celer?

Celer Network is an Internet-scale, trust-free, and privacy-preserving platform where everyone can quickly build, operate, and use highly scalable decentralized applications. It consists of a group of layer-2 scaling protocols running on top of existing and future blockchains. Celer provides unprecedented performance and flexibility through innovation in off-chain scaling techniques and incentive-aligned cryptoeconomics.

Celer Network embraces a layered architecture with clean abstractions that enable rapid evolution of each individual component, including a generalized state channel and sidechain suite that supports fast and generic off-chain state transitions; a highly efficient payment routing protocol that achieves an order of magnitude higher throughput compared to state-of-the-art solutions; a powerful development framework and runtime for off-chain applications; and new cryptoeconomic models that provide high availability, strong security, stable liquidity, and network effect for the off-chain ecosystem.

This site currently focuses on the core architecture of Celer state channel network, and will be extended to cover other components of the Celer technical stack later.