What Is Layer 2? Your Guide To Blockchain Scaling And Faster Crypto Transactions

Key Points

1. Layer 2 solutions, such as rollups and state channels, significantly increase transaction throughput (up to 65,000 TPS) and reduce fees (as low as $0.0196) compared to Layer 1 blockchains.

2. The Ethereum Dencun upgrade introduced 'blob space' (EIP-4844), which reduced Layer 2 transaction fees by approximately 90%, facilitating the migration of everyday payments and micro-transactions.

3. Popular Layer 2 solutions include Polygon zkEVM, Optimism, and Arbitrum, each offering different benefits such as EVM compatibility, high transaction throughput, and strong cryptographic guarantees.

4. Layer 2 networks improve Ethereum's scalability by handling bulk transactions off-chain while anchoring security to Layer 1, enabling Visa-scale throughput without compromising decentralization.

5. Challenges to Layer 2 adoption include user experience hurdles like bridging ETH and switching RPCs, as well as regulatory scrutiny over cross-chain operations and sequencer overhead.