How do Layer 2 Solutions Work?
Layer 2 solutions are protocols built atop a blockchain (Layer 1) to improve scalability and transaction speed. The key premise is to alleviate the congestion on the main blockchain by offloading some transactional operations to a secondary layer, facilitating quicker and more efficient processing.
Mechanisms of Layer 2 Solutions
- State Channels: These allow participants to conduct transactions off-chain while keeping the final settlement on-chain. Only the opening and closing transactions are recorded on the main blockchain.
- Plasma: This framework enables the creation of smaller blockchains (child chains) tied to a main blockchain (root chain). Transactions are processed on the child chains and periodically settled on the main chain.
- Rollups: Rollups bundle multiple transactions into a single one, which is then submitted to the main blockchain. Optimistic and ZK-Rollups are two variants, differing in how they handle transaction validity.
- Sidechains: These are independent blockchains linked to the main chain, allowing for the transfer of assets between them. They can operate under different consensus algorithms or rules.
Benefits
Layer 2 solutions enhance user experience by offering lower fees and faster confirmation times. They also alleviate pressure on the main blockchain, allowing it to maintain decentralization and security.