Layer 2 solutions are already tackling one of the biggest issues of blockchain technology: scalability. Learn what they are and why they matter.
Layer 2 blockchains provide a solution to tackle layer 1 blockchains’ scalability
As more dapps joined the Ethereum network, the layer 1 blockchain suffered from congestion, resulting in high transaction fees. The invention of layer 2 offers a viable solution to the scaling of layer 1 blockchains.
- Layer 1 is the underlying main blockchain architecture. Both Ethereum and Bitcoin are layer 1 blockchains.
- Layer 2 refers to the scaling solutions to reduce congestion through secondary blockchains. Examples of layer 2 chains are Optimism, Arbitrum, and StarkNet.
- Layer 2 blockchain addresses scalability through rollup technology, mainly Optimistic rollups and Zero-knowledge rollups.
Due to the unique architecture to guarantee decentralization and security, pioneer blockchains like Ethereum and Bitcoin cannot handle massive traffic on their networks. This is called the blockchain trilemma.
An ideal blockchain must boast three primary properties, decentralized, secure, and scalable. Unfortunately, the blockchain trilemma states that a simple blockchain architecture can only achieve two out of three.
Scalability is necessary if people want to enjoy the benefits of blockchain technology at an affordable cost. This is where “layer-2” solutions come into play to address the blockchain trilemma. This article will help you quickly understand the concept of layer 1 (L1) and layer 2 (L2).
What is layer 1?
Layer 1 is the underlying main blockchain architecture. Ethereum and Bitcoin are both layer 1 blockchains because they provide the base for various layer 2 networks to build on top of them. Ethereum, as the layer 1 network, has the following properties:
- A network of node operators to secure and validate the network.
- A network of block producers.
- The blockchain itself and the history of transaction data.
- The consensus mechanism for the network.
What is layer 2?
Layer 2 refers to the scaling solutions to mitigate congestion through secondary blockchains. A layer 2 is a separate blockchain that extends the mainnet while inheriting the security guarantees of its mother chain.
Theoretically, L2s have no capacity limits. Therefore, they can significantly lower transaction fees and increase processing speeds, thus improving L1s’ efficiency overall.
How does layer 2 work?
This technology “rollups” or bundles transactions and executes them in the L2 environment before sending the updated data back to the mainnet. So instead of having the Ethereum network process thousands of DeFi transactions individually, the computation is offloaded on layer 2.
The next step is to post transaction data back to layer 1, and there are two approaches to rollups: optimistic and zero-knowledge.
Optimistic rollups assume transactions to be valid but can be challenged if necessary. If an invalid transaction is suspected, a fault-proof will be run to inspect.
ZK-rollups bundle and compute hundreds of transactions off-chain and generate a cryptographic proof. Then the compressed data will be sent back to Ethereum Mainnet as proof of their validity.
Blockchain technology and cryptocurrencies have brought disruptive innovations to the global economy and people’s digital lives. However, in order to serve billions of global users, blockchains must upgrade and be capable of handling much higher throughput.
Ethereum layer 2, as an independent ecosystem on top of the mainnet, inherits the security of Ethereum and increases transaction speed and throughput. Therefore, layer 2 can be critical in tackling blockchains’ scalability, accelerating mainstream adoption of blockchain.
Currently, many blockchain dapps have turned to layer 2 solutions for a more user-friendly experience. This is especially true with dapps requiring high-frequency transactions, such as NFTs and games.
Check out What Are the Best Layer 2 Blockchains for Non-fungible Tokens to find more details about the layer 2 movements.