Is Kraken Launching A Layer-2 Blockchain?

Is Kraken Launching A Layer-2 Blockchain?

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According to recent reports, the Kraken team is in talks with different blockchain developers about a potential partnership to launch a layer-2 blockchain network. 

Choosing Right Developer

Kraken, the popular cryptocurrency exchange, is reportedly in discussions with blockchain developers Polygon, Matter Labs, and the Nil Foundation regarding the potential launch of a layer-2 blockchain network. This move follows the success of Coinbase's layer-2 blockchain, Base.

Kraken is carefully considering which blockchain developer will construct its network. The project is shrouded in secrecy, and sources prefer to remain anonymous as the exchange's efforts are still ongoing and have not been officially disclosed to the public.

No Confirmation, Only Clues

When asked for a comment on the matter, Kraken did not provide specific details. However, a spokesperson stated, 

“We’re always looking to identify and solve for new industry challenges and opportunities. We don’t have anything further to share at this time.”

A job listing on Kraken's website seeking a "Senior Cryptography Engineer" further suggests their interest in layer-2 solutions. The job description explicitly calls for expertise in the "design and implementation of layer-2 solutions."

Layer-2 Technologies: Optimistic vs. ZK 

In August, Coinbase introduced its own layer-2 network, Base, built on the OP Stack, created by OP Labs. Base quickly gained market share, boasting $574 million in total value locked and diversifying its revenue streams.

Optimism, Arbitrum, and Base employ Optimistic Rollup technology, a layer-2 protocol that scales Ethereum by processing transactions off-chain in batches. This technology relies on fraud proofs, assuming that submitted transaction data is correct and valid until proven otherwise.

In contrast, existing layer-2 solutions from Polygon, Matter Labs, and Nil Foundation are based on zero-knowledge (ZK) proof solutions. These also aim to scale Ethereum but rely on validity proofs for individual transactions.

Kraken's Potential Direction

While it remains uncertain which layer-2 network Kraken will ultimately choose, if they decide to proceed with the firms under consideration, it is likely to be based on ZK technology. ZK Rollups, though currently less prevalent than Optimistic Rollups, offer certain advantages due to their EVM compatibility, such as faster transaction processing without waiting periods.

Ethereum co-founder Vitalik Buterin also expressed a preference for ZK Rollups over Optimistic Rollups, stating, 

"My opinion is that in the long run, ZK-Rollup will eventually beat Optimistic Rollup because they have basic advantages like users don't need to wait 7 days for a withdrawal."

As the competition between crypto exchanges intensifies, Kraken's choice of developer and technology will play a crucial role in determining the success of a possible layer-2 network.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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