Whether you are trying to buy an NFT, swap tokens, or make a payment, blockchain networks like Ethereum can become congested. This is because the more people use them, the slower and costlier they get. The crypto world saw this issue coming, and innovators found a way to fix it without rebuilding everything from scratch.
The solution is what we now call Layer 2s. In this guide, I will walk you through everything you need to know about Layer 2s. You will understand how they work and, more importantly, how they can help you enjoy faster and cheaper transactions. That said, let’s start by understanding the main problem that created the need for them in the first place.
KEY TAKEAWAYS:
- A Layer 2 is a separate blockchain that works on top of a Layer 1, which is built to improve speed, reduce costs, and make your crypto experience smoother.
- They were created to ease traffic by removing the congestion that slows the blockchain down.
- Types of Layer 2 solutions include rollups, state channels, plasma, and sidechains.
- The advantages of using Layer 2s include faster transactions, lower fees, scalability, and environmental efficiency.
Why You Need Layer 2s
To understand Layer 2s, you first need to understand the issue with most Layer 1 blockchains like Bitcoin and Ethereum. Ethereum, for example, can only process about 15 to 20 transactions per second. That might sound fine until you realize that thousands of people around the world are using it at the same time. During busy periods, you could wait several minutes for your transaction to confirm, and pay high fees just to get it processed faster. Layer 2s were created to ease the traffic by removing the congestion that slows the blockchain down.
What Exactly Is a Layer 2?
A Layer 2 is a separate blockchain that works on top of a Layer 1, like Ethereum. It’s built to improve speed, reduce costs, and make your crypto experience smoother. They don’t replace the main blockchain; instead, they work together with it. The main blockchain still handles core security, data storage, and record-keeping, while the Layer 2 handles most of the everyday transactions.
When you make a transaction on a Layer 2 network, it happens off the main blockchain but is later confirmed or recorded there. This setup allows the network to process thousands of transactions per second while keeping the same security level as the Layer 1 it’s built on. Common examples of Layer 2 solutions include Arbitrum, Optimism, Polygon, zkSync, and StarkNet.
Read Also – Blockchain Scalability Challenges and Solutions
Types of Layer 2 Solutions
Different Layer 2 solutions use different methods to achieve faster transactions and lower fees for you. Let’s explore them so you understand how each one works.
- Rollups: They roll up hundreds of transactions into one. This bundle is then sent to the main blockchain for verification.
- State channels: State Channels allow you to transact directly with another person multiple times without posting every transaction to the blockchain.
- Plasma: Plasma chains are smaller versions of the main blockchain that process transactions separately. They periodically send summaries to the main blockchain for security.
- Sidechains: Sidechains are independent blockchains that run parallel to a Layer 1 blockchain. They are connected to the main blockchain through a bridge that allows you to transfer assets between them.
The Benefits of Using Layer 2s
Now that you understand what Layer 2s are and how they work, let’s look at why they matter to you.
- Faster transactions: If you are tired of waiting several minutes for your transaction to confirm, Layer 2s will change your experience completely. Transactions that used to take minutes can now be completed in seconds.
- Lower fees: Gas fees can be a nightmare, especially during network congestion. On Layer 2s, transaction fees are much lower because the network processes many transactions at once and splits the cost among them.
- Scalability: Layer 2s allow blockchains to handle many more transactions per second, which is essential for mass adoption.
- Better user experience: When transactions are fast and cheap, using crypto feels smooth and convenient.
- Environmental efficiency: Since Layer 2s reduce the workload on the main blockchain, they help cut energy consumption.
Final Thoughts
Layer 2s represent the next step in making crypto usable for everyone. With them, you can finally see what blockchain was meant to be: fast, affordable, and open to everyone. Indeed, you deserve to enjoy the freedom of blockchain without frustration, and thanks to Layer 2s, that future is already here.
FAQs
- What is a Layer 2 blockchain?
A Layer 2 blockchain is a secondary framework built on top of an existing Layer 1 blockchain (like Ethereum).
- How do Layer 2 blockchains improve transaction speed?
Layer 2 networks process thousands of transactions off the main blockchain and then confirm them collectively on Layer 1, drastically reducing transaction time from minutes to seconds.
- Are Layer 2 transactions secure?
Yes, Layer 2 solutions maintain security by periodically settling transaction data on the main Layer 1 blockchain, which preserves the robust security and decentralization of the underlying network.
- How do Layer 2 solutions reduce transaction fees?
By bundling multiple transactions or processing them off-chain, Layer 2s split the cost across many actions, resulting in significantly lower gas fees compared to direct Layer 1 transactions.
- Do Layer 2 blockchains help with environmental sustainability?
Because Layer 2s significantly reduce the workload on Layer 1 blockchains, they help cut down energy consumption, contributing to a more environmentally efficient crypto ecosystem.
References
- trakx.io – A beginner’s guide on blockchain layer 2 scaling solutions
- sosovalue.com – What is Layer 2 in Crypto? A Beginner’s Guide to Scaling Blockchain Networks
- ledger.com – What Are Ethereum Layer 2 Blockchains and How Do They Work?
