The Truth About Layer 2 Protocols

One factor that continues to prevent blockchain⛓ technology from being widely adopted is its scalability. You must have heard it a couple of times and may be wondering what exactly a “Layer 2” means. A blockchain network👩‍💻 such as bitcoin or Ethereum is called a “Layer 1” network. Transactions💳 happen at these layers. Due to the limited processing🖥 power of these L1 networks, they are not able to handle increased demand. A Layer 2 solution can solve this problem by improving the performance of the chains⛓ underneath. Bitcoin has the Lightning Network, Ethereum has Polygon. These are examples of Layer 1 chains with their respective Layer 2 chains.

Bitcoin and Ethereum trade off scalability for security🚨 and decentralisation for scalability. In this light, it makes sense why major blockchain networks like Bitcoin🪙 can process transactions at a rate of around 7 transactions per second. As a point of comparison, Visa💳 can process 24,000 transactions per second through its payment system.

As an auxiliary framework for processing transactions, layer 2 protocols reduce the workload of the base layer. As a result, transactions on blockchain networks🕸 will be faster (throughput) and the system will be able to handle more users. It is imperative to note that layer two protocols do not have a universal🪐 definition, and all scaling options aren’t created equal. What exactly does that mean?

Despite the fact that Lightning ⚡️ Network transactions have a lower level of censorship resistance and security than on-chain transactions, they are still much more secure than those made through traditional, centralized transaction servers due to the assurances provided by the Lightning Network. Blockchain ecosystems in the future will be diversified with layers 1 and 2 options working together as a meta-blockchain system. Based on all the information given, it would be reasonable to conclude that a paradigm shift is inevitable.
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