What is Layer2? A popular explanation of Layer2 in blockchain

Layer2 refers to network layers built atop the main blockchain to enhance transaction scalability and reduce processing expenses.

Oct 29, 2024 at 01:49 pm

What is Layer2?

Layer2 is a short name for Layer 2, which refers to the additional network layers built on top of the main blockchain (Layer 1) to improve scalability and cost-effectiveness. Key features of Layer2: improved transaction throughput and lower costs, without the need to create consensus on the base chain. In Blockchain:

  1. Layer 0 refers to the underlying infrastructure, such as the bitcoin network, or Ethereum's node.
  2. Layer 1 refers to the blockchain itself, such as Bitcoin, Ethereum, and Polygon.
  3. Layer 2 builds on top of layer 1 and is essentially an extension to the underlying blockchain or network. 

Purpose of Layer 2:

The primary purpose of Layer2 is to offload transactions from the main blockchain, allowing for faster and cheaper transactions. Layer2 uses various techniques to achieve this, such as:

• State Channels: State channels allow multiple parties to transact directly with each other without broadcasting every transaction on the main chain.
• Plasma Chains: Plasma chains create child blockchains that run parallel to the main chain, each of which can process a certain number of transactions.
• Optimistic Rollups: Optimistic rollups bundle multiple transactions together and submit them to the main chain as a single transaction, significantly reducing transaction fees.
• zk-Rollups: zk-Rollups use zero-knowledge proofs to submit proofs of valid transactions to the main chain, without revealing the actual transaction data.
• Validium: Validium uses smart contracts to execute and store transactions off-chain, with regular validity proofs submitted to the main chain.

Benefits of Layer2:

Layer2 solutions offer several advantages:

• Increased Scalability: Layer2 can significantly increase transaction volume and throughput compared to Layer 1.
• Reduced Costs: Layer2 solutions typically have lower transaction fees than Layer 1, as they process transactions off-chain.
• Faster Transactions: Transactions performed on Layer2 are usually faster than those on Layer 1, as they reduce on-chain congestion.
• Security: Layer2 solutions inherit the security of Layer 1, as they are anchored to the underlying blockchain through regular validity proofs or checkpoints.

Conclusion:
Layer2 solutions play a crucial role in improving the scalability and cost-effectiveness of blockchains. By offloading transactions from Layer 1, Layer2 enables faster transaction times and lower costs, while maintaining the security of the underlying blockchain.