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Layer 2
- Layer 2 crypto encompasses cryptographic solutions built on top of existing blockchain protocols like Bitcoin and Ethereumto address scalability issues. These solutions, such as payment channels, state channels, sidechains, Plasma, and Rollups (like ZK-Rollups and Optimistic Rollups), aim to improve transaction throughput, reduce fees, and enhance overall network performance.
- Layer 1 protocols handle the fundamental consensus and security of blockchain networks but are limited in handling a high volume of transactions, resulting in slow confirmation times and higher fees. Layer 2 technologies act as a supplementary layer, enabling off-chain transactions and smart contract execution, reducing the burden on the main blockchain and increasing scalability.
- These Layer 2 crypto solutions offer faster and cheaper transactions, supporting wider blockchain adoption and usability. However, it is crucial to consider trade-offs and security factors when choosing and implementing a specific Layer 2 solution.