To understand layer 2’s, layer 1’s must first be discussed. Layer 1’s are the main blockchain, the primary level. Some examples of these include Bitcoin, Ethereum, Cardano, and Binance. These layer 1’s will be where most of the transactions will take place. One of the key aspects of blockchains is their scalability and their ability to process transactions per second (TPS). Because so many transactions occur on Layer 1’s, they can get packed up, reducing their TPS. Bitcoin, for example, can process only 7 transactions per second. This is where Layer 2’s come in; they were specifically designed to reduce the strain on Layer 1’s. They do this by reducing the number of transactions processed on layer 1 or by reducing the amount of information that needs to be verified. The two main layer 2 systems are Sidechains and Rollups.
- Sidechains: This is a type of Layer 2 that acts as an independent blockchain with its own consensus mechanism. Using a blockchain bridge or two-way bridge, it can take transactions from the parent chain and process them, then send them back. This system allows the main chain to benefit from the TPS provided by another chain.
- Rollups: This type of Layer 2 increases scalability by combining multiple transactions into one block, effectively reducing network congestion. These rollups can vary by their levels of decentralization and are categorized into two main groups: Optimistic and ZK Rollups.
Some popular Layer 2’s include Arbitrum, Optimism, Polygon, and Lightning. Arbitrum, Optimism, and Polygon are all Ethereum Layer 2’s, but Lightning is a Bitcoin Layer 2.
These Layer 2’s are used primarily for blockchains that have more congested Layer 1’s, yet newer blockchains have developed better mechanisms that reduce this congestion. These blockchains don’t need Layer 2’s as much as Bitcoin does. Ethereum, however, is becoming less congested and less reliant on Layer 2’s.
If you want to learn more, check out the links below:
What are Layer 2 Blockchain Solutions?
What are Layer 2s? | Layer 2s Explained for Beginners
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