Layer 2 - Definition and Meaning

What Is Layer 2?

Before diving into the layer 2 definition, you should understand what layer 1 means. It is the base level of the blockchain architecture, aka the main network or “mainnet”. Layer 1 blockchains like Ethereum and Bitcoin not only define the core rules of the ecosystem but also validate and finalize transactions independently from external systems.

As for the term “layer 2”, it refers to secondary frameworks or protocols built on top of L1 blockchains. The main goal of such systems is to reduce the bottlenecks related to transaction speed and scaling that major cryptocurrency networks often face.

What You Need To Know About Layer 2

Many layer 1 networks are not capable of processing thousands of transactions per second (TPS), which has a negative effect on their potential to scale up in the long term. This means that there is a need for higher throughput – that’s where layer 2 blockchains step in.

Some of the most prominent examples of layer 2 solutions are:

Lightning (Bitcoin)

Polygon (Ethereum)

BitTorrent Chain (TRON)

Even though different layer 2 systems may have distinct operational principles, they effectively address the same scalability problems of their respective L1 chains by significantly improving transaction speed and oftentimes offering lower fees.

For instance, Lightning processes 1,000,000 TPS, while Bitcoin can only handle 7. Besides, Bitcoin’s on-chain median fees have at times reached nearly $34, but the transaction costs on Lightning have always revolved around the $0 mark due to multiple zero-fee routing nodes and liquidity providers operating across the network.

All in all, since L2 off-chain solutions are added to the mainnet as an extra layer, the L1 networks don’t have to undergo any structural changes. As a result, they can continue running their standard processes to ensure security and decentralization, while layer 2 systems focus on ensuring high throughput.