Layer 2 solutions offer a way of increasing transaction speeds and scaling while benefiting from the security of the main chain. For example, Bitcoin's Lightning Network or Ethereum's Plasma, Polygon, and so on. Meanwhile, minting and transfers on the Polygon Layer 2 blockchain are around $0.05, a factor of 2,000 times cheaper than their Layer 1 equivalents. Layer-1 blockchains can validate and finalize transactions without the need for another network. Unlike Ethereum, which is limited to 13-17 transactions per second (TPS), Polygon can execute up to 7,000 TPS, making it comparable to Visa. A layer-2 blockchain solution is a second layer built on an existing blockchain network. Layer 2 blockchains take on a portion of their underlying blockchain's transactional workload to improve overall efficiency. Layer 2: A scaling solution to Layer 1 protocols. The basis of the blockchain is layer 0 and consists of a set of components with which a decentralized network can function. Instead of adding every single daily transaction of every Bitcoin user to the blockchain, the Lightning Network allows users to effectively open tabs with each other and make endless . Bitcoin). A few more popular layer 2 blockchains are Polygon, Arbitrum, Immutable-X, X-Dai, and Optimism. Subsequently, fees for using the base layer drop, extending the network's utility to more users. Now let's dig into it a bit more, and to do this we need to explain layer 1 (L1). Some examples are Bitcoin, Ethereum, Solana, Cardano and Ripple. One of the solutions to these problems is the creation of Layer 2 systems, most of which are aimed at solving the scalability problem, which rests primarily on the throughput of blockchain networks (quantity and speed of transactions). StarkNet is a permissionless decentralized ZK-rollup layer 2 solution for the . Sidechain: These basically operate be'side' the main blockchain. By facilitating transfers of value that are fast and efficient, layer 2 solutions open up broader possibilities for blockchain application. The second floor of the house is Layer 2, which has certain benefits but is not essential for a blockchain to function. It's the settlement layer for all transactions on the network. That's how they came up with the term "off-chain." The following is an example of what I mean. Therefore, the layer 0 is at the beginning of the interoperability and scalability of blockchains. At a fixed interval, a compressed representation of each block is committed to a smart contract on Ethereum. Oracles - these are third-party providers of external data for smart contracts. The payment protocol Lightning Network, for example, is the layer 2 protocol the Bitcoin network is making use of to benefit from quicker transfers and lower fees. In other words, Layer 1 solutions change the rules of the original blockchain directly, while Layer 2 solutions rely on a parallel network to facilitate transactions off the mainchain. Layer 2 platforms greatly increase blockchain scalability. But did you know Bitcoin has an ecosystem from L0 to L3? Typically, layer 2 protocols are optimized for reducing network congestion, lightening the load and increasing throughput of the mainnet. It transfers all tokens to Layer 2 and guarantees consistency by continuously generating zero . Celo 4. In other words, there is no need for a third party, such as a miner, to confirm the transactions; this improves transaction speed. Layer 2 is a third-party integration used with Layer 1 to enhance the number of nodes and system throughput. Although scaling may happen with current implementations of blockchain . This means that Layer 2 blockchains are far more cost-effective than Layer 1, which comes down to their more efficient models. As blockchain works on an open architecture, anyone that can solve problems faced by a network can build a Layer 2 blockchain. A great example can be seen in El Salvador, where Bitcoin is being used as legal tender - this would not have been possible without the speed and efficiency of the Lightning Network. Layer 2 sort of acts as an intermediary between the main chain and the information that is to go on it. Layer 2 blockchain solutions are functional components of the blockchain that can be stacked on top of the foundation that Layer 1 provides. Layer 1: The base blockchain network. Layer-1 simply means the underlying main blockchain network. For example, the Ethereum mainchain is currently capable of processing 15 transactions per second (TPS). Layer 1 blockchain's characteristics can be summarized as follows: . The following Layer-1 vs. Layer-2 blockchain guide explores both approaches and how they contrast. TL;DR. Layer 1 refers to a base network, such as Bitcoin, BNB Chain, or Ethereum, and its underlying infrastructure. For example, while Ethereum handles less than 20 transactions per second, some layer 2 networks supercharge this to over 2,000 tps. Layer 1 is usually a simple, broad, and general purpose. Like other layer 2 scaling solutions, it aims to tackle scalability problems by offloading some of the validation and transaction processing processes to another blockchain. Harmony 3. Blockchain layer 2 solutions: A Layer 2 blockchain operates on or adjacent to an underlying Layer 1 blockchain. Some examples of Layer-2 solutions are: 1. Currently, layer 2 solution represents blockchain's best chance of displacing traditional centralised systems. The foundational projects of Layer 1, and the benefits they generated, helped make the idea of Layer 2 protocols become a reality. Smart Contract - written codes that automate transactions on the blockchain. A layer-2 protocol blockchain is a third party integration that is used in existing interface of a layer1 blockchain. Some of the examples of Layer-2 scaling solutions include: State Channels A state channel facilitates two-way communication between a blockchain and off-chain transactional channels. We have already touched upon Arbitrum in one of our previous articles. Despite having their own working mechanisms and particularities, both solutions are striving to provide increased throughput to blockchain systems. Bitcoin Blockchain Layers Example Bitcoin is the first popularized public blockchain and an L1. Layer 2's (or L2s) increase the speed and reduce the cost of transacting on a blockchain. On Bitcoin, for example, Lightning Network is aimed at enabling coffee-sized transactions, while Rootstock seeks to provide sophisticated smart contract functionality. A state channel is sealed off by the smart contract mechanism instead of validation by nodes of the Layer-1 network. They serve as add-ons for the parent blockchain. Blockchain layer 2 refers to the intended scaling solutions, such as protocols or networks, that operate atop a blockchain, essentially functioning as different layers of blockchain. ZKS price chart - coinmarketcap. Examples of layer 2 platforms for Bitcoin include Lightning Network and Liquid Network. Layer 0 is the network infrastructure that runs underneath the blockchain forming the fundament of the technology. StarkEx The purpose is to improve transaction speed and scalability limitations that face major blockchain protocols. Developed by L2Lab, it has already launched on Ethereum mainnet. As a result, the Lighting Network increases the processing speed on the Bitcoin blockchain. For example, layer 2 solutions improve the network performance alongside programmability while reducing transaction fees. Miners can use these solutions to increase the number of transactions processed by a blockchain network while maintaining an immutable ledger's benefits. Nested blockchains, sidechains, and state channels are all good instances of layer 2 scaling solutions. THORChain 5. The best examples of layer 0 projects include Cardano, Cosmos, and Polkadot. Each of these cryptocurrencies is trying to solve the problems of Layer 1 blockchains. In a way, layer 2 blockchain scaling solutions work by sharing the transaction load of the main blockchain network. gas fees), and help the layer 1 ecosystem scale. The blockchain layer two is a solution for scalability issues. Layer-3 In addition, the Lightning Network brings smart contracts to the Level 1 Bitcoin blockchain. They are designed to increase transaction speed, decrease transaction costs (i.e. 5 Real-life examples of Layer 2 blockchain solutions Most L2s are still on their way to being fully designed for scalability that doesn't sweep security loopholes and compatibility issues under the rug. Solving the scalability problem will go a long way toward ensuring blockchain's general acceptance. More importantly, layer 2 protocols will accelerate the integration of blockchain into global commerce. However, layer 0 projects can come to the rescue: unlike layer 2 solutions, they improve the efficiency of cross-chain interaction instead of the speed and the cost of any particular blockchain. Most layer 2 solutions work alongside the main blockchain, processing data and transactions outside but still utilizing the blockchain's security. Arbitrum, Optimism, and Boba Network are examples of layer-2 projects employing optimistic rollups. The fees can rise sky-high. As such, the main reason for Arbitrum's existence is to tailor to the shortcomings of current smart contracts based on Ethereum. These include -inefficiency and very high execution costs which result in bad Ethereum user experience as well as expensive . It does so, usually in one of four ways: 1. Layer 1 vs. Layer 2 Types of Layer 1 Blockchain Solutions Consensus Protocol Sharding Benefits of Layer 1 In Blockchain Solutions Layer 1 Blockchain Examples 1. Layer 2 is a secondary protocol built on top of the existing blockchain network. Here are three examples of Layer-2 blockchain scaling solutions: State Channels A state channel is a two-way communication channel between participants. Immutable-X - Immutable- X is the first Layer 2 scaling solution for NFTs on Ethereum. Although geared towards speed and scalability, Layer 2's may also have their own unique selling points. For instance, consider the Lightning Network as an example of a layer 2 blockchain deployed on the Bitcoin blockchain. State Channels. Bitcoin, Ethereum, Solana, Binance Smart Chain, Litecoin, and Polkadot are just some of the existing examples of Layer 1 solutions. A. Layer 1 functions as the soil for applications to germinate and grow on. Layer 1 and layer 2 Blockchain Other Blockchain layer 2 examples are Ethereum's Plasma, Polygon, and so on. Like Bitcoin, Ethereum can be thought of as a Layer 1 protocol. Sidechains Sidechains are secondary blockchains that run parallel to the layer-1 blockchain. We often refer to Layer 2 solutions as "off-chain" blockchain technology. Examples of layer 2 projects include "rollups" on Ethereum and the Lightning Network on top of Bitcoin. First, they help to increase the speed of transactions in a network. A good example of a parallel network operating as Layer 2 would be Polygon, which operates on the Ethereum blockchain. . As seen in the example above, blockchain layer two can be used to handle players moving in a game efficiently and off-chain. Examples of this type of layer 2 solution can be found in: Rollups:These layer 2 scaling solutions roll up a group of transactions into one single transaction and then feed it back into the main . The layer 2 scaling solutions don't require changes in the layer 1.. They execute transactions off-chain and take some pressure off the main blockchain. . This prevents congesting the network and slowing down transactions occurring within it. Sidechains are sort of a cross between layer 1 and layer 2 solutions, where sidechains run separately from the blockchain, and . Why are layer 2 solutions important? The ZKSwap is a Layer 2 scaling solution, specifically an automated market maker (AMM) type decentralized exchange (DEX) powered by zkRollup technology. Difference between Layer 1 and Layer 2 Blockchain Layer 1 and layer 2 scaling solutions may be distinguished on the basis of their fundamental outline. . They were created to prevent overdependence or collapse of its layer 1 counterpart. The Lightning Network is perhaps the layer-2 crypto protocol that is easiest to understand because it focuses on the relatively simple concept of online payments. Bitcoin Lightning Network). However, Layer-1 is only responsible for managing the addition and creation of new blocks to the blockchain. Layer 1 is the main blockchain network in charge of on-chain transactions, while Layer 2 is the connected network in charge of off-chain transactions . Here, we'll look at some of the most popular Ethereum L2 scaling solutions, commonly called sidechains. The layer 2 protocols can also be referred to as 'side chain network' or an 'off-chain layer'. The Bitcoin blockchain, Ethereum, XEM, and other base layer protocols form Layer 1. . Blockchain is the first layer of the decentralized ecosystem. For example, Bitcoin and Ethereum. They validate and finalize transactions but have issues with scaling (e.g. But if you can't wait until the L2 revolution reaches its apex, you can get started with the most respected L2 solutions as soon as today. One example of a sidechain is the Liquid Network, attached to Bitcoin's main chain. There are a number of basic options for technological solutions used in Layer 2, including: Payment channels Layer 2 blockchain. You can consider Bitcoin mining devices and ATMs and L0, along with Internet, electricity, and essentials. Layer 2 Blockchain Examples Some of the most common Layer 2 blockchain examples are given below which use Layer 2 protocols blockchain. Popular examples are Bitcoin Lightning Network and Ethereum . The purpose of the main chain is to assign tasks and take control of all the parameters. Another example is Ethereum, which is a leading blockchain network that can currently process only 15 to 20 transactions per second, and this costs users to pay higher gas fees to process their transactions at the earliest. When people talk about blockchains and networks, this is what they usually refer to. Layer 3: Enables blockchain-based dApps, games, and more. Below are some of the most used layer-2 blockchain protocols: Nested blockchains Nested blockchains consist of the main chain and secondary chains designed such that a chain can operate on top of the other. They are third-party integrations that enhance efficiency (system throughput) or scalability on top of L1 chains. Layer-1 updates usually . Popular examples of Ethereum layer 2 . Layer 2 refers to the scaling solutions to reduce congestion through secondary blockchains. Layer-1 can exist on its own without needing layer-2, but layer-2 need layer-1 to work properly. 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