As the Ethereum network reached its limits, Layer 2 solutions quickly emerged as the most popular scaling option for blockchains. They offer safe and effective connections to existing networks. Layer 2 solutions extend the capabilities of a Layer 1 blockchain. By employing this strategy, they are able to take advantage of the security of their parent chain while providing superior transaction speeds and costs. This approach is different from sidechains, making it a highly attractive option for developers and users who want more scalable solutions without sacrificing security.
Understanding Layer 2 Solutions
Layer 2 solutions are off-chain extensions of the core blockchain that increase throughput and decrease costs. They process and validate transactions off-chain while still being protected by the security and consensus properties of the primary chain. These Layer 2 solutions increase transaction throughput and reduce transaction costs by processing transactions off the main blockchain. They then periodically anchor these transactions back to the main chain. This method reduces backpressure on the core chain and thus increases performance of the entire network.
No matter how you slice it, Layer 2 solutions are typically more secure than other scaling solutions. Since Layer 2 is ultimately dependent on the mainchain’s consensus and security, it’s much safer for users in general. There are several types of Layer 2 solutions, each with different trade-offs and advantages.
Rollups: A Prominent Layer 2 Solution
Of all the potential Layer 2 solutions, rollups have emerged as the leading solution. Rollups take hundreds of transactions and bundle them together into one single transaction then submit it to the mainchain. This entire process greatly reduces the amount of data kept directly on the main chain. In turn, these create better scalability and cheaper transaction fees for you. Two primary types of rollups exist: ZK-Rollups and Optimistic Rollups.
ZK-Rollups employ zero-knowledge proofs to prove transactions’ validity, whereas Optimistic Rollups operate on the presumption that transactions are valid by default. In comparison to processing transactions directly on the main chain, both types of rollups provide massive gains in scalability. Healthy layer 2 solutions—think rollups—can reduce transaction fees by orders of magnitude. This is infinitely more cost-effective than having each transaction processed directly on the main chain. This decrease in cost broadens the number of use cases that blockchain technology becomes practical and accessible for.
Scalability and Efficiency
Layer 2 solutions make energy-intensive use of the mainchain. This ensures better scalability under peak-demand situations. Layer 2 solutions, which process transactions off-chain, are able to value the transaction thousands of times per second. They then roll these transactions up onto the main chain, using as little on-chain data as possible. This innovative efficiency brings the result of faster transaction times with minimal to no fees incurred by users.
A two-way bridge connects Layer 2 to the mainchain, and assets move in both directions fluidly between the two blockchains. This interoperability gives users the ability to leverage the better scalability and efficiency of Layer 2. Simultaneously, it maintains the principal chain’s security and decentralization.
Layer 2 vs Sidechains
Layer 2 solutions — such as zk rollups — have quickly become a major solution to solve the blockchain trilemma. They sit together with sidechains as two main methods for enhancing performance. Both strategies are aimed at maximizing transaction throughput and minimizing transaction fees. They share a very different security model and implementation strategy. Sidechains are independent blockchains that run in parallel to the main chain and can have their own consensus mechanisms. Though they can provide extremely high scalabilities through various means, they come with added security vulnerabilities.
Though layer 2 solutions can have their own security checkpoints, most inherit the security of the main chain. This in turn makes them a safer bet for scaling blockchain applications. Layer 2 solutions are indeed more scalable if you consider scalability as being about security, trust, and longevity. Layer 2 solutions tend to be more secure due to the nature of Layer 2 relying on the mainchain’s consensus and security. The efficacy of Layer 2 solutions, though, is contingent on the type of scalability context that we are talking about.
