⛓️ What is Layer 2 Blockchain

A Layer 2 blockchain refers to a secondary protocol built on top of an existing Layer 1 blockchain (the main blockchain). Its primary function is to enhance the original blockchain's performance by improving scalability, transaction speed, and efficiency, all while maintaining the security and decentralization principles of the main blockchain.

Layer 2 solutions achieve this by processing transactions off-chain—meaning they handle multiple transactions outside of the main blockchain, reducing congestion. Once processed, these transactions are "batched" and recorded back onto the Layer 1 blockchain. This offloading of transaction processing alleviates bottlenecks, reduces transaction fees, and increases the overall throughput of the network, making the blockchain more scalable and efficient.

Types of Layer 2 Solutions:

• State Channels: These are private channels between participants that allow multiple transactions to occur off-chain, with only the final state being recorded on-chain. Bitcoin’s Lightning Network and Ethereum’s Raiden Network are notable examples.

• Sidechains: Independent blockchains connected to the main blockchain. Sidechains can have their own consensus mechanisms but interact with the main chain for security and final settlement.

• Plasma: A framework for creating child chains tethered to the main blockchain, allowing for parallel processing of transactions and smart contracts without overloading the main chain.

• Rollups: These involve processing transactions off-chain and then rolling them up into a single transaction or proof on the main blockchain. There are two types: Optimistic Rollups, which assume transactions are valid unless challenged, and ZK-Rollups (Zero-Knowledge Rollups), which use cryptographic proofs to verify transactions off-chain.