Layer 2 (L2)

Layer 2 refers to a set of protocols or solutions built on top of a primary blockchain (Layer 1) to improve its scalability and efficiency. These solutions aim to handle transactions off the main chain, reducing the load, congestion, and transaction fees on the primary network. Common examples include payment channels like the Lightning Network for Bitcoin or sidechains like Polygon for Ethereum. By processing transactions off-chain, Layer 2 solutions can significantly increase transaction throughput and speed. Ultimately, they maintain the security and decentralization of the underlying Layer 1 blockchain while enhancing its practical usability for everyday transactions.
Layer 2 solutions are crucial for blockchain networks like Ethereum and Bitcoin as they evolve to handle increased usage and complex decentralized applications (dApps), aiming to provide a user experience that rivals traditional centralized systems in terms of speed and cost.