Layer 2 - what is it?

Layer 2 is a technology that scales the network through the formation of second-level blockchains.

The structure of each cryptocurrency system is radically different from the traditional electronic base of the fiat financial system. The fundamental difference lies in the blockchain system and open source code, the information of which is available to all participants in the cryptocurrency community. One of the terms that may periodically arise at one of the stages of activity is Layer 2. It refers to special solutions for scaling blockchains. The main goal of this method is to increase transaction throughput, resulting in the possibility of increasing profitability and reliability of customer data protection.

Prerequisites for implementing Layer 2

Blockchains of the most highly capitalized cryptocurrency systems have recently been increasingly programmed for smart contracts. In addition, they are censorship resistant due to complete decentralization. This creates favorable conditions for the development and integration of various products in different areas. Simply put, not only cryptocoins are created on the basis of blockchains, which are already a valuable asset for making a profit. In an ecosystem like Ethereum, it is possible to provide various services, services, and applications. The main problem is the low speed of transaction processing. For comparison:

  • the Visa network has the ability to process up to 20 thousand transactions in 1 second;
  • in the ETH network, the throughput reaches only 11 thousand transactions.

It was with the aim of increasing throughput that new technologies were developed, such as Layer 2. The use of this function can significantly reduce the load on the network and prevent transaction delays. As a result, the cost of transactions does not exceed the expected threshold, as well as the timing of their implementation; accordingly, business scaling within the ecosystem occurs faster and more efficiently.