Crypto Dictionary
Layer 2
Definition
A secondary framework or protocol that is built on top of an existing blockchain system.
Deep Dive
Layer 2 refers to a secondary framework or protocol built on top of an existing Layer 1 blockchain, designed primarily to improve its scalability and transaction throughput. These solutions aim to process transactions more efficiently off the main chain, thereby reducing congestion, lowering fees, and increasing transaction speeds, before periodically settling aggregated results back to the Layer 1 blockchain for finality and security. Layer 2 solutions allow the base layer to remain decentralized and secure while offloading much of the computational burden.
Examples & Use Cases
- 1Optimism and Arbitrum, both prominent Optimistic Rollups built on Ethereum to scale its transaction capacity and reduce gas fees
- 2The Lightning Network, a Layer 2 solution for Bitcoin that enables instant, low-cost micro-transactions by processing them off-chain
- 3Polygon (formerly Matic Network), a framework that offers various scaling solutions, including a widely used PoS sidechain, to enhance Ethereum's performance
Related Terms
ScalabilityRollupState Channel