What are Layer 2’s?

Have you ever played with building blocks?

Imagine that the bottom layer of your block tower is the main blockchain, and each block you stack on top of it represents a transaction.

But what happens when you want to build a really tall tower? It becomes harder and takes more time to stack blocks on top of each other, right?

That's where Layer 2 blockchains come in. They're like a second layer of blocks that you can stack on top of your original tower. This new layer is faster and easier to build, so you can add more blocks and create a much taller tower than before.

It's like magic!

Why do we need them?

Layer 2 blockchains help solve a big problem that regular blockchains have: speed and cost.

Imagine you have a toy store and lots of customers want to buy toys from you. If you only have one cash register, it will take a long time for everyone to get their turn and the line will be very long.

This is like a regular blockchain where every transaction has to be processed on the main chain, which can be slow and expensive.

Layer 2 blockchains help solve this problem by letting many transactions happen at the same time without having to wait for each one to be processed on the main chain. This makes transactions much faster and cheaper.

It's like having many cash registers open in your toy store so that lots of people can buy toys at the same time.

In addition, layer 2 blockchains can help increase the capacity of the main chain by processing transactions off-chain.

This means that the main chain doesn't get clogged up with too many transactions and can handle more people using it. It's like having a big parking lot outside your toy store where people can park their cars instead of taking up space in your store.

Overall, layer 2 blockchains help make blockchain technology more usable and accessible to more people by making it faster and cheaper to use.

How do they work?

Imagine that you have a big bag of marbles, and you want to share them with your friends. However, you don't want to give them all away at once because you might need some of them later.

To solve this problem, you could put some of the marbles in a smaller bag and give that bag to your friends.

This way, your friends can trade marbles amongst themselves without having to ask you for more every time they want to make a trade.

This is kind of like how layer 2 blockchains work. They take some of the transactions that would normally happen on the main blockchain and put them into a smaller, separate blockchain that runs alongside the main one.

These smaller blockchains can handle a lot more transactions at once than the main blockchain, which makes them faster and cheaper to use. And because they're connected to the main blockchain, you can always move your assets back and forth between the two as needed.

Okay… Now what is the difference between a Layer 1 and Layer 2 blockchain?

This is a good question, and not many people fully understand this quite yet.

A layer 1 blockchain is like a big room where everyone can see and hear everything that's going on.

Everyone can talk to each other and make sure that everything is working as it should. But because everyone is in the same room, it can get very crowded and it can be hard to hear what people are saying.

On the other hand, a layer 2 blockchain is like having smaller rooms inside the big room.

Each room can have its own conversation without everyone else listening in. This makes it easier for people to communicate with each other and get things done faster.

In other words, layer 1 blockchains are slower and less efficient because they have to handle everything in one big room, while layer 2 blockchains are faster and more efficient because they can split things up into smaller rooms.

What are popular Layer 2’s?

Here are some examples of Layer 2 Blockchains

• Polygon ($MATIC)

• Arbitrum ($ARB)

• Optimism ($OP)

• zkSync Era

These are the most popular ones currently but there are more up and coming.

Benefits of Layer 2’s

• Faster transaction processing times

• Lower transaction fees

• Greater scalability and throughput

• Reduced network congestion and gas fees

• Increased privacy and security features

• Ability to execute complex smart contracts

• Interoperability with other blockchains and networks

• Enhance user experience and accessibility.

Limitations of Layer 2’s

With the benefits, there are limitations to their technology.

• Complexity: Layer 2 solutions can be more complex and difficult to understand and implement than layer 1 solutions.

• Security: While layer 2 solutions can improve scalability and reduce fees, they may also introduce security risks, such as attacks on the off-chain infrastructure or smart contracts.

• Centralization: Some layer 2 solutions may require centralization, such as a trusted operator or custodian, which can introduce counterparty risk.

• Interoperability: Layer 2 solutions may not be interoperable with each other or with layer 1 blockchains, which can limit their usefulness and adoption.