Every system evolves to meet the changing needs of its users – consider how quickly smartphone designs and functionality have changed. Similarly, layer 2 technologies for blockchain networks found fertile ground in the urgent demand for blockchain network improvement.
In this article, we will discuss layer 2 in blockchain, its importance, and its benefits; before that, it is imperative to talk about blockchain scalability. The scalability of a blockchain depends on its capacity to handle both rising volumes of transactions and a more significant number of nodes.
Blockchains like Ethereum use layer 2 blockchains—built on top of the primary blockchain—to increase scalability and improve transaction times and efficiency.
Let’s get into the details to learn more about layer 2 blockchain!
Significance Of Blockchain Scalability
Although blockchain is promising as a new foundation of the global economy, the Blockchain Trilemma, which involves striking a balance between blockchain decentralization, security, and scalability, remains a significant obstacle.
Key to the blockchain standards is the concept of scalability, or the ability of the network to support a higher volume of transactions. Consequently, scalability will play a crucial role in the development of blockchain technology in the future.
Blockchain performance may be drastically impacted by the growing number of use cases and widespread use of the technology. With increasing demand, blockchains risk experiencing slowdowns in performance and showing signs of being unable to scale.
Layer 2 Blockchain: What Is It?
When discussing the architecture of a blockchain, the first layer, or layer 1, is the most fundamental; hence, before we talk about layer 2, the first step is to specify what we mean by “layer 1.”
On-chain networking is another name for these Layer-1 scalability technologies. Besides laying out the ground rules for the ecosystem, it may also verify and settle transactions, as is the case with cryptocurrencies like Ethereum, Bitcoin, and Solana.
Layer-1 protocols are capable of processing and settling transactions within their blockchains. Each network uses its native coin for fees paid during transactions.
Layer 2 is typically defined in terms of how blockchain networks may be made more efficient. It’s preferable to seek simple explanations of blockchain layers rather than trawl through competing theories. Layer 2 methods function as a supplemental protocol over a different blockchain network. There is no connection between the base layer and the layer 2 procedures. The auxiliary protocols help validate transactions and reduce the load on the primary protocols’ job management.
Understanding their function in simplifying blockchain transactions is as easy as answering the question, “What is a Layer 2?” Reduced transaction times can be attributed to the layer 1 blockchain’s reduced workload. Therefore, layer 2 protocols can accommodate a large number of users simultaneously.
Strategies Of Layer 2 Blockchain
In layer 2, rollup, sidechain, state channel, and nested blockchain are the most common techniques used.
Most rollups are of the zero-knowledge variety, which involves sending a single transaction on the main chain that contains many layer-2 off-chain transactions. The system uses proof of validity to ensure that all transactions are legitimate. The main chain, connected to the side chains via smart contracts, is where assets will be kept. The smart contract will then verify the rollup’s success—no need to change the original network if you use this strategy.
Separate from the leading blockchain network, sidechains have their validators. A smart contract can be a link between the main chain and the sidechain and can also be used to ensure the security of the sidechain. For this reason, you need to guarantee the sidechain is functioning correctly, as it might influence the main chain’s assets.
Both sides can communicate with one another over a State channel. An isolated section of the underlying blockchain is connected to an off-chain transaction channel and the parties involved seal off the section. Typically, this is accomplished using a multi-party or pre-existing smart contract. Afterward, the parties carry out the transaction or series of off-chain transactions without immediately posting the transaction data to the underlying distributed ledger, also known as the main chain.
When the set of transactions is complete, the final state of the channel is broadcast to the blockchain for verification. This method was designed to boost the network’s capacity and transaction speeds.
Some of the earliest instances of layer 2 networks are nested blockchains. Nested blockchains typically consist of a primary chain and many subsidiary chains. Nested blockchains are designed so one chain can efficiently work together. The main chain is in charge of job allocation and setting all relevant parameters in this setup. The subsidiary chains carry out specialized main-chain transactions and submit results for reviews and approvals.
Benefits of Layer 2
Here is a summary of the benefits Layer 2 can offer.
The potential for enhanced scalability is the next significant value benefit connected with layer 2 technologies. Increased performance is guaranteed by layer 2 protocols, which in turn opens more scaling possibilities. Better scalability is essential for blockchain apps to provide satisfying experiences for growing numbers of users.
Security is the main benefit of blockchain layer 2 technologies. Layer 2 protocols prevent issues from architecture modifications. Layer 2 solutions comply with the principal blockchain layer, containing a base layer or protocol modifications.
Fewer Transaction Fees
Reduced processing requirements for transaction validation result from the usefulness of layer 2 blockchains. Therefore, layer 2 initiatives can aid in reducing blockchain networks’ transaction prices.
The Bottom Line
Hence, Layer 2 blockchain is increasingly indispensable, as evident by the many value advantages and underlying functioning principles of existing layer 2 implementations. Innovative solutions to the scalability problems of existing blockchain networks can be found in layer 2 solutions. Every day brings a plethora of new possibilities as blockchain technology continues to gain traction and expand its application.
For this reason, layer 2 solutions will play a significant role in developing this technology. With the addition of Layer 2, new blockchain networks offering unique benefits and practicality to users become possible.