Also known as: L2

Definition

Layer 2 refers to a secondary framework or protocol built on top of an existing blockchain (Layer 1) to enhance its scalability and efficiency. This approach aims to alleviate congestion and reduce transaction costs by processing transactions off the main chain while still leveraging its security.

Why it matters

• Enhances transaction throughput.
• Reduces fees for users.
• Improves user experience by decreasing wait times.
• Facilitates the adoption of blockchain technology in various applications.

Risks & Pitfalls

• Potential security vulnerabilities if not properly implemented.
• Dependence on the underlying Layer 1 blockchain for security.
• Possible fragmentation of the ecosystem.

Examples

• Solutions like state channels and sidechains are common Layer 2 implementations.

Related

None.