What are Layer 2 Solutions?
Layer 2 (L2) is an additional network or technology that runs on top of an already existing blockchain system. The goal is to overcome the scalability and transaction speed constraints that major blockchain technologies must deal with.
Typically, this involves shifting some of the transactional load from a blockchain network to an adjacent network, which will conduct the processing and report back to the base layer to finalize the findings. The base layer blockchain is made more scalable and less crowded as a result.
Benefits of a layer 2 solution:
- No structural alterations are required to the main chain.
- Increased throughput without sacrificing network security at the base layer.
- Reduced costs.
Need of layer 2 solutions:
- Although it isn’t the case, a blockchain would ideally be able to handle any number of transactions per second (TPS). By giving the main blockchain some breathing room without having to increase block sizes or implement other changes that would affect the protocol’s ability to be decentralized and have high levels of security, L2 scaling solutions can assist in solving issues like these.
- For example, thousands of TPS cannot be processed on the Ethereum and Bitcoin blockchains, and as volume increases, fees also increase. Higher throughput is desired because it has the potential to obstruct adoption and long-term growth.
Example of Layer 2 solutions:
Lightning Network: Bitcoin
- In comparison to centralized payment networks, the Bitcoin blockchain can only handle 3 to 7 TPS, a tiny amount. Because of its small block size and low TPS, Bitcoin promotes a high degree of decentralization by keeping hardware costs down. A global network of nodes must accept, mine, distribute, and validate each Bitcoin transaction.
- Among Layer 2 options for Bitcoin, the Lightning Network has seen the most adoption. It processes main chain transaction bundles off-chain before transmitting the results back, similar to many other L2 systems. The state channels, which are associated channels that carry out these actions, are what the Lightning Network uses specifically to run. Smart contract capabilities are also added to Bitcoin via Lightning, significantly enhancing the network as a whole.
Layered Architecture of Blockchain Ecosystem
Blockchain has been hailed as the most revolutionary in the past ten years. Most likely to be impacted are the financial markets. Healthcare, pharmaceuticals, insurance, smart properties, automobiles, and even governments are just a few of the industries that are incorporating technology. However, Bitcoin – A Peer-to-Peer Electronic Cash System, which is also the initial application of blockchain technology, is the implementation of the technology that has been most successful so far. So, it makes sense that the easiest way to grasp blockchain technology is to first comprehend how the Bitcoin System was created and put into use.
An ever-expanding digital list of data entries is what a blockchain is, to put it simply. This type of list is made up of numerous data blocks that are linked together and secured using cryptographic proofs in the order that they are stored. The article focuses on discussing the layered architecture of the blockchain ecosystem.
The following topics will be discussed here:
- What Is Blockchain?
- Components of Blockchain Technology
- Different Layers of Blockchain.
- Types of Blockchain Layers Based on Professionals.
- What Are Layer 2 Solutions?
- Ethereum Blockchain Laye
- What Is The Blockchain Security Layer?
- Layer 1 vs Layer 2 Blockchain.
- Best Layer 1 Crypto
- Best Layer 2 Crypto
- Best Layer 3 Crypto
- Best Layer 4 Crypto
Let’s start discussing each of these topics in detail.