⛓️ What is Layer 2 Blockchain

A Layer 2 blockchain refers to a secondary protocol built on top of an existing Layer 1 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 decentralisation 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.

Types of Layer 2 Solutions

• State Channels: Private channels between participants that allow multiple transactions to occur off-chain, with only the final state recorded on-chain.

• Sidechains: Independent blockchains connected to the main blockchain with their own consensus mechanisms, interacting with the main chain for security and final settlement.

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

• Rollups: Transactions are processed off-chain and rolled up into a single transaction on the main blockchain. Two types exist — Optimistic Rollups, which assume transactions are valid unless challenged, and ZK-Rollups, which use cryptographic proofs to verify transactions off-chain.