Understanding Blockchain Layer 2

Layer 2 scaling solutions enhance blockchain transaction throughput while maintaining the security of the underlying blockchain. They address the bottleneck issues faced by popular blockchains like Ethereum, which struggle with low transaction processing speeds and high fees. Layer 2 solutions, such as zero knowledge rollups and optimistic rollups, enable thousands of transactions per second without compromising security, distinguishing them from side chains like Polygon.

What Exactly is Layer 2?

Layer 2, in the realm of blockchain technology, refers to a set of solutions designed to increase transaction throughput while upholding the security features of the primary blockchain network they're built upon.

Why Layer 2?

Blockchain platforms like Ethereum have gained significant traction due to their programmable nature (utilizing smart contracts) and their resistance to censorship. However, Ethereum's limitation in processing only 7 to 11 transactions per second pales in comparison to traditional payment networks like Visa, which can handle over 20,000 transactions per second. As demand surges and the Ethereum network becomes congested, users engage in bidding wars to prioritize their transactions, leading to exorbitant transaction fees. In 2021, sending a token over Ethereum could cost upwards of $80 due to network congestion.

Introducing Layer 2 Solutions

Layer 2 solutions emerge as a remedy to Ethereum's scalability challenges. They alleviate pressure on the Ethereum network by abstracting transactions away from the primary blockchain. This abstraction enables the processing of thousands of transactions per second. The two primary forms of layer 2 solutions are zero knowledge rollups and optimistic rollups.

Key Distinctions

What sets layer 2 solutions apart, such as DeversiFi, StarkWare, Optimism, and Arbitrum, from side chains like Polygon, is their security inheritance from the Ethereum chain itself. Unlike side chains that rely on separate networks, validators, or entities to secure funds, layer 2 solutions maintain their security through the Ethereum network.

In summary, layer 2 scaling solutions provide a crucial bridge to overcome the limitations of blockchain scalability. They enable increased transaction throughput without compromising on the fundamental security principles of the underlying blockchain, offering a promising path towards the widespread adoption of blockchain technology in various applications and industries.

Read more:

What is Distributed Ledger Technology (DLT)?

What is Cryptojacking?

Blockchain Consensus: What Needs to Understand?

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