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In the wake of Bitcoins rise, we have witnessed significant demand for decentralized applications and smart contracts.

Likewise, the need for scalable and efficient blockchain solutions has never been more valid given the issues that plague Layer 1 chains such as Ethereum.

These solutions dedicated to enhancing the scalability and efficiency of Layer 1 blockchains are referred to as Layer 2.

In reference to our article on Layer 1 Blockchains, we understand that Layer 1s are the foundation, base layer, or structure upon which the entire decentralized ecosystem is built.

While layer 1 chains have paved the way for decentralized applications, they have scalability problems that affect the transaction throughput and confirmation times as users increase.

As a result, users may experience high fees and slow transaction processing during periods of network congestion.

Layer 2 are blockchain solutions to Layer 1. These layer 2 solutions are created to improve and correct the scalability problem inherent in Layer 1 blockchains by moving certain processes off-chain.

Layer 2 chains or protocols operate on top of independent and existing blockchains whilst handling transactions or smart contracts in a more scalable manner. They seek to reduce the burden on the main blockchain, enabling faster and cheaper transactions.

Layer 2 protocols are mostly parallel or dependent on the framework of Layer 1 (framework often includes (consensus mechanism, sharding, e.t.c).

However, there are Layer 2 protocols independent of the main chain or Layer 1 framework, as in the case of Polygon Network.

Although there are four types of Layer 2 solutions, namely state channels, sidechains, plasma, and rollups, our main focus is on Rollups.

Before we dive into Rollups, lets briefly discuss other types.

Rollups work to improve layer 1 blockchains by processing every transaction upon Layer 2 networks before submitting them for validation on Layer 1.

The "rollup" is used to describe the way the Layer 2 chain bundles up many different transactions to be submitted on the main chain.

Rollups are of two types - Optimistic rollup and Zero-Knowledge rollup.

The difference is in how they validate the transaction before Layer 1 processes them.

While Optimistic rollup is optimistic that the transactions are valid, Zero-knowledge rollup "attempts" to prove the validity of the transactions without checking the content.

Examples of Layer 2 protocols using optimistic rollups include Boba Network, Arbitrum, and Optimism.

With ZK Rollups, some of the Ethereum Layer 2 protocols include Starknet and ZkSync.

Rollups provide the main chain with cryptographic information that helps to verify transactions quickly. They also check for correctness of data, which reduces the main chain workload by more than half with verification and publishing on layer 1.

ScalabilityThis is the primary benefit of Layer 2 solutions. As transactions are offloaded from the main chain, Layer 2 blockchains can handle a much higher volume of transactions, reducing congestion and lowering fees.

Cost-effective

Following a reduction in on-chain activity, transaction fees on Layer 2 solutions are generally lower than those on Layer 1 blockchains. This makes decentralized applications more accessible and cost-friendly for users.

Increased Transaction SpeedLayer 2 blockchains provide faster transaction confirmation times since the majority of transactions occur off-chain. The improved speed is vital for applications that require real-time interactions.

Less Environmental Impact

By taking off the strain on the main blockchain, Layer 2 solutions offer a sustainable blockchain ecosystem, as they often require less energy consumption compared to their Layer 1 counterparts.

Layer 2 Challenges While Layer 2 blockchains present substantial advantages, they are not without challenges.

The security of off-chain transactions and maintaining interoperability with the main chain are considered to be issues that limit the adoption of L2s.

In addition, widespread adoption and standardization of Layer 2 solutions will be necessary to achieve a seamless and interconnected decentralized ecosystem.

Layer 2 blockchain solutions provide a critical step in the evolution of blockchain technology, as they address the scalability concerns that have affected the broader adoption of decentralized applications.

Given the blockchain space continuous innovation, Layer 2 solutions would likely play a pivotal role in creating a more scalable, efficient, and sustainable decentralized future.

Read the original post:

Layer 2 and Rollups | by SMC Research | Nov, 2023 - Medium