OKX, the sixth largest cryptocurrency exchange, has announced that it is joining rival crypto exchanges in building its own blockchain. OKX’s Layer 2 network, called “X1,” will make use of Polygon’s Chain Development Kit (CDK), which Kraken is also considering for its own Layer 2 blockchain.
Layer 2 solutions are becoming increasingly important in the crypto world as they aim to solve the issues of scalability, affordability, and speed that are facing many existing blockchains. By building its own Layer 2 network, OKX hopes to offer its users a more efficient and cost-effective trading experience.
With rival exchanges like Coinbase already rolling out their own Layer 2 solutions like “Base”, and Kraken also reportedly looking into it, the competition is heating up. In this blog, we will take a closer look at OKX’s X1 network, as well as other existing Layer 2 solutions, and the potential impact and benefits of increased adoption.
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OKX’s Layer 2 Network – X1
OKX is set to release its layer 2 solution called X1 in the first quarter of 2024. X1 will be built on Polygon’s CDK and utilise the zero-knowledge technology, which is currently the hottest trend in blockchain. The CDK’s role in OKX’s development of X1 is crucial. OKX engineers are also core contributors to the CDK, meaning they will work on the project’s code base as it evolves.
X1 is set to make things accessible for developers, enabling them to build on X1 to deliver user-friendly, world-class consumer Web3 applications while maintaining interoperability with other networks and ecosystems. Moreover, developers and users of X1 will benefit from the use of OKB tokens for gas fees. But what’s exciting is that the benefits of X1 won’t be limited to OKX users only.
The entire ecosystem of chains that is interoperable, which includes X1’s ecosystem, is considered to be one of the biggest winners in the space. Polygon Labs CEO Mark Boiron emphasised the idea of a big ecosystem of interoperable chains. He believes that networks, regardless of whether they are considered rivals or not, are not appearing competitive but one.
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Rival Exchanges’ Layer 2 Solutions
Coinbase and Kraken are among the major cryptocurrency exchanges pursuing their own Layer 2 projects. Coinbase released its ‘Base’ blockchain earlier this year, which is built using Optimism’s OP Stack. Kraken is also reportedly looking into creating a layer 2 blockchain. Polygon CEO believes that having the biggest ecosystem of interoperable chains will benefit all parties involved.
It remains to be seen which platform will be the most successful. Still, the emergence of multiple Layer 2 solutions is an indicator of the increasing importance of scalability and speed in the cryptocurrency market. In terms of a comparison between X1 and rival solutions, it is difficult to make a definitive judgement at this stage.
Each platform has its unique selling points, and ultimately, the success of any new technology will depend on its adoption by users. Nevertheless, the entry of big names like OKX, Coinbase, and Kraken into the Layer 2 space is encouraging. It highlights the wider industry’s focus on solving the problems of scalability and transaction speed.
Polygon’s Chain Development Kit
Polygon’s CDK plays a vital role in OKX’s development of X1. The CDK is a toolkit designed to help developers build Decentralised Applications (dApps) on the Polygon network. It provides a range of tools and frameworks to support the creation of high-performing dApps on the Polygon network, with support for both Ethereum Virtual Machine (EVM) and WebAssembly (Wasm) architectures.
OKX’s engineers will become core contributors to the Polygon CDK, working on its codebase as it evolves. This partnership between OKX and Polygon is expected to benefit both parties. OKX will be able to leverage the scalability and accessibility of Polygon’s network to create user-friendly, world-class consumer Web3 applications. At the same time, Polygon will benefit from OKX’s expertise in the cryptocurrency space.
Kraken is also reportedly considering using the Polygon CDK for its own project. While the announcement may seem like a potential obstacle for Kraken, Polygon Labs CEO thinks it will be fine. In an interview with CoinDesk, Boiron said that it should be more attractive to exchanges, adding that all the chains can be looked at as being competitive, or you can look at them as kind of being one.
Potential Impact and Benefits of X1
Firstly, X1’s support of zero-knowledge technology and OKB tokens as gas fees makes it a significant player in reducing the high gas costs associated with Ethereum’s current Layer 1 blockchain. This reduction in gas fees will be more accessible and affordable for small investors, who can now execute trades without incurring a hefty transaction fee. This is a big win for users who have been feeling the pinch on Layer 1 blockchains.
Secondly, with OKX’s integration with Polygon using CDK, other exchanges may look to implement the chain, which solves issues of lack of interoperability. This could serve as a starting point for creating a unified blockchain ecosystem in the near future. It can be seen as a vital bridge between Layer 1 and Layer 2 blockchains.
Thirdly, the increased adoption of Layer 2 solutions like X1 means that decentralised exchanges can now handle increased transaction volumes while still upholding high standards of security and decentralisation. Due to this, users will not need to worry about issues such as losing control over their crypto assets. Click here to learn about blockchain in detail.
Improvements and Risks for X1
For OKX and its users, X1 should provide faster and cheaper transactions, as well as access to a larger selection of DeFi applications. OKB holders should also benefit from reduced gas fees and increased utility as the token becomes a key part of X1’s infrastructure. The partnership with Polygon and the collaboration between the two teams should also accelerate the development and adoption of Layer 2 solutions.
The competition between exchanges like Coinbase, Kraken, and OKX to build their own Layer 2 networks is an indication of the growing importance of these solutions in the crypto ecosystem. Increased adoption of Layer 2 networks could also help alleviate some of the congestion and high fees associated with using Ethereum’s mainnet.
However, as with any new technology, there are potential risks and challenges. Layer 2 solutions are still in their early stages, and there is no guarantee that they will be widely adopted or prove to be sustainable over the long term. Additionally, interoperability between different Layer 2 networks and with Ethereum’s mainnet remains a challenge that must be addressed.
OKX Taking a Significant Leap Towards a Layer 2 Network
OKX’s announcement of its Layer 2 network, X1, is a promising development for the crypto ecosystem. The partnership with Polygon and the competition between exchanges to build their own Layer 2 solutions should accelerate the adoption of this critical technology.
While there are still challenges and risks associated with Layer 2 solutions, the benefits they offer are clear. Faster, cheaper transactions, increased scalability, and greater access to DeFi applications are just a few of the advantages that X1 and other Layer 2 networks could bring. Visit https://player.me/category/news/crypto/ for the latest news related to what’s currently happening in the cryptocurrency world.