In blockchain technology, there are three essential layers, each addressing specific needs: adequate protection of participants, continuous operation of the framework, and equal opportunities for all participants in the network. In contrast, as more users are interacting with blockchain, the system may lag in its performance. That is when layer 2 solutions enter the stage as improvements to layer 1 blockchains making them faster, more scalable, and less crowded while retaining security and governance measures. In this particular article, I will discuss the notion of the layer-2 blockchains, layers of the blockchain space, the distinction between layer-1, and layer-2 blockchains, and more.
What is a Layer-2 Blockchain?
This type of blockchain framework is created to operate on another blockchain called Layer 1, hence the name Layer-2 blockchain. First-generation Layer-1 blockchains such as Bitcoin and Ethereum are not proof against issues like high fees and slow transaction speeds that worsen as the market heaves. To solve these problems layer-2 solutions implemented some techniques such as sidechains, state channels and rollups to increase the overall transaction rate and to minimize the fees.
Breaking Down the Layers of Blockchain
Layer-1 (L1): The Foundation of Blockchain Networks:
Layer-1 or the base layer is where every block of a certain blockchain firsthand tasks are performed, this includes consensus processes on Ethereum or the Proof of Stake or on Bitcoin, the Proof of Work. These mechanisms facilitate secure and decentralised management of transactions taking place in the pertinent block chain. But layer-1 networks can get congested with low TPS and high fees during periods of congestion leading to unsavory user experience.
Layer-2 (L2): Addressing Scalability:
These bottlenecks are addressed by layer-2 solutions which are developed to be built on top of layer-1 blockchains. Application solutions such as rollups, sidechains, and state channels solve the congestive headache with layer 1 without compromising security, enabling the execution of transactions even faster and at a lesser cost.
In this specific case, layer 2 solutions have already advanced relatively far addressing layer 1 issues, but further improvements could be made to optimize the protocols and improve the application process for layer 2 for specific application requirements. This is where layer-3 (L3) blockchains, which have the complicated computational requirements needed for advanced financial computations come in.
Layer-3 (L3): Enabling Specialized Functionality:
Layer-3 blockchains are intended for a particular sector of the Web3 universe, including NFTs, DeFi, and gaming. The L3 solutions allow the users of blockchains to connect several chains at a time, which increases convenience and compatibility across different platforms.
Combined, these three layers- L1, L2, and L3 create a well rounded system that prepares blockchain technology for its future growth and evolution keeping into consideration its security as well as the user experience.
Layer-1 vs. Layer-2: Key Differences:
The only difference between layer-1 and layer-2 blockchains is that the former are part of the blockchain family while the latter are subcategories. Original Layer-1 blockchains like Bitcoin and Ethereum are supposed to perform basic mission-critical tasks, including transactions logging and validation. However, in an environment of high traffic activity, these networks are slow to scale affecting the number of fees charged per transaction.
Layer-2 blockchains, on the other hand are actually built as solutions to optimize the existing layer-1 blockchains over time. Because layer-2 solutions compile transactions or perform them outside the main chain, they relieve layer-1 networks of additional burdens, thus increasing efficiency.
Some of the approaches evident in layer-2 technology are rollups, state channels and side chains which work smartly enough to allow less expensive and much faster transactions without crowding up the layer-1 networks.
In conclusion, layer-1 forms the fundamental security and decentralization feature while layer-2 increases capability and smoothness in application, making blockchain applicable for other areas such as gaming and things that involved finance and payouts often referred to as DeFi.
Top Layer-2 Blockchains:
Polygon (POL)
Polygon also known as the sidechain, is a blockchain solution located on Ethereum network and designed to provide decentralised scalability, flexibility and autonomy. Like many decentralized networks, Polygon has its native token known as POL which, among other things, is used in governing the network and paying for transactions.
Optimism (OP)
Optimism is a layer-two solution which applied optimistic rollups to augment Ethereum. Optimism makes micro-interactions happen when they usually occur in the background and antimatter interactions brought to the front only periodically submitting a batch of transactions reflected in magnitude enhanced Ethereum network capability. It follows community-irresponsible governance and management platform that focuses on sustainable development for the ecosystem.
Arbitrum (ARB)
The last layer-2 blockchain is Arbitrum which employs optimistic rollups to decentralize data off the Ethereum network. This enables Web3 apps and smart contracts to do things and perform transactions at cheaper and much faster rates than the usual Ethereum.
Benefits and Challenges of Layer-2 Blockchains:
Layer-2 solutions can be considered as parts of the Web3 system because they work within it, though these solutions have their own issues. In the following part of this paper, we look at the opportunities that layer-2 technology offers; we also discuss the challenges that layer-2 technology poses.
Benefits
Scalability: Layer-2 blockchains work on several layers below the primary blockchain and perform transactions off the layer-1 BlockChain which in effect reduces its traffic congestion and increases Speed.
Lower Transaction Costs: The computational off-chain capacities of layer 2 integrate solutions to make transactions affordable, thus drawing in more users and projects from Web2 to Web3.
Faster Transactions: Layer-2 solutions combine multiple transactions at once, thereby improving the rate of transactions and at the same time improving the user experience while at the same time giving assurances that the system is secured to the base.
Challenges
Security Dependencies: Layer-2 solutions are often not as decentralized or immune to attacks as layer-1 blockchains and can partake in specific risks that layer-1 networks do not, or at least should not, experience.
Complexity and Adoption: Layer 2 projects to be implemented into layer 1 networks are challenging, which means newcomers should learn the basics before engaging.
Interoperability Issues: While layer-2 blockchains provide better scalability, they could have integration problems with other systems, which are solved by layer-3 systems that provide integration.
The Future of Layer-2 Blockchains:
Layer-2 solutions are expected to ongoing solve the scalability problems of layer-1 networks such as Bitcoin and Ethereum. As more people add decentralized technology to their solutions, affordable and efficient smart contract solutions will be required; layer-2 solutions are expected to rise to the occasion of demanding scalable and inexpensive blockchain technologies without compromising decentralization or security.
Layer 1 and layer 2 will interoperate even more, making for a more coherent ecosystem that grants overall, expanded access to assets and information on various Blockchains. The general user experience thus will be improved by wallet integration and faster transactions thereby increasing usage.
Moreover, Layer 2 innovation like rollups, zk proofs are announces as the next revolutionary steps and more cryptocurrency startups launched on these solutions. Other analysts believe that layer-2 technology could one day overtake other layers of blockchain and become an actual layer within a distributed economy.
