What is a Layer-2?

Layer-2 solutions are scaling technologies built on top of existing blockchains (Layer-1) that process transactions off the main chain while inheriting its security guarantees, dramatically increasing throughput and reducing fees without compromising the decentralization or security of the underlying network.

These protocols batch multiple transactions together before submitting them to the main chain as a single proof or data set, effectively amortizing the cost of blockchain consensus across many user operations and enabling throughput that can be orders of magnitude higher than the base layer alone.

Layer-2 solutions come in various forms including rollups (which post transaction data on-chain), state channels (which only settle final states on-chain), sidechains (which have their own consensus mechanisms), and plasma chains (which use fraud proofs), each making different tradeoffs between security, functionality, and efficiency.

By moving the majority of transaction processing off the main chain while still benefiting from its security and decentralization, Layer-2 solutions make blockchain technology practical for everyday applications like gaming, social media, and micropayments that require low fees and instant finality.

As Layer-2 ecosystems mature, they are developing rich application environments, native tokens, and interoperability solutions, creating specialized domains optimized for specific use cases while remaining connected to the broader blockchain ecosystem through their parent Layer-1 networks.