Layer 2 solutions, often referred to as "Layer 2s," are secondary protocols built on top of a blockchain (Layer 1) to increase its capacity and speed. They are an essential part of the blockchain ecosystem, providing scalability solutions that allow networks to handle higher transaction volumes while maintaining security and decentralization.
Layer 1 refers to the underlying main blockchain architecture. In the context of Ethereum, for example, Layer 1 is the Ethereum mainnet where all transactions are processed and finalized. It is the base-level where the blockchain's most fundamental processes occur, including transaction validation and consensus mechanism.
Layer 2s are protocols built on top of Layer 1 to improve its functionality. They handle transactions off the main chain, thereby reducing congestion and improving transaction speed and scalability. Layer 2 solutions include rollups, sidechains, and state channels, among others.
As blockchain networks grow, they often struggle with scalability issues. Layer 1 can only process a limited number of transactions per second (TPS), leading to slower transaction times and higher fees. Layer 2 solutions address these issues by taking transactions off-chain, allowing for more transactions to be processed simultaneously, reducing fees, and improving overall user experience.
Layer 2 solutions work by taking transactions off the main chain, processing them, and then recording the final state on the main chain. This allows for many transactions to be processed in a single batch, significantly reducing the load on the main chain.
Rollups are a type of Layer 2 solution that bundle or "roll up" multiple transactions into a single one, which is then posted to the main chain. There are two main types of rollups: Optimistic Rollups and ZK Rollups.
Optimistic Rollups are a Layer 2 solution that assumes good faith among network participants. They allow transactions to be processed instantly, with the final verification and posting to the main chain happening later. If a fraudulent transaction is detected, it can be challenged and removed.
ZK Rollups, on the other hand, use zero-knowledge proofs to validate transactions off-chain before posting them to the main chain. This method provides a higher level of security and scalability, as it doesn't rely on the assumption of good faith.
Sidechains are separate blockchain protocols linked to the main chain. They allow for transactions to be processed independently from the main chain, thereby increasing the overall transaction capacity of the network.
Validiums are similar to ZK Rollups, but they store data off-chain, providing even greater scalability. However, this comes at the cost of some degree of decentralization.
Layer 1 and Layer 2 are both integral components of blockchain technology, but they serve different purposes and have distinct characteristics.
The variety of Layer 2 solutions is a response to the different needs and requirements of various applications and use cases.
Each Layer 2 solution offers a unique balance between scalability, security, and decentralization.
Optimism uses Optimistic Rollups to improve the scalability of Ethereum, allowing for faster transaction times and lower fees.
Popular products on Optimism:
Arbitrum One also uses Optimistic Rollups, but with a unique approach to dispute resolution and data availability.
Popular products on Arbitrum One:
Polygon zkEVM is a decentralized Layer 2 scalability solution for Ethereum. It utilizes cryptographic zero-knowledge proofs to provide validity and fast finality to off-chain computations.
Popular products on Polygon zkEVM:
*Note that many products adopt a multi-chain approach and are available on multiple chains.
Layer 2 solutions play a crucial role in the evolution of blockchain technology, providing the scalability needed for mainstream adoption while maintaining the security and decentralization that make blockchain unique.
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