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Crypto Terms:  Letter L

What is Layer 2?

Layer 2 - a secondary protocol built on an existing blockchain system that helps to solve scaling and transaction speed issues.
2 minutes

Let's find out Layer 2 meaning, definition in crypto, what is Layer 2, and all other detailed facts.

Layer 2 is a secondary protocol developed on top of an existing blockchain system that helps major cryptocurrency networks to handle scaling and transaction speed difficulties. Large blockchains, like Ethereum, became really popular over the last few years because they are resistant to censorship and can be programmable. This means that a lot of products can be built on them and they can be used in various cases.

However, the issue with Ethereum is that it can only process 7 to 11 transactions per second, which is really not that much. A lot of users on the blockchain start to compete with each other over who will be the first to process their transactions, which leads to a bidding war over space that results in an increase in transaction prices. It even cost over $80 to send a token to another address on the Ethereum network at one point in 2021.

Layer 2 protocol was launched in order to solve problems like the one that is described above. It enables transactions to be detached from the underlying blockchain, which allows thousands of transactions to be processed per second. There are two main forms of Layer 2 protocols – Zero-Knowledge Rollups and Optimistic Rollups.

Besides, note that layer 2 solutions inherit their security from Ethereum (or other blockchains), which means that they are not dependent on any other network, validators, or businesses to secure assets.