What is a Layer 2 Blockchain & Which is Best?

Blockchain technology has undeniably revolutionized the digital landscape, with applications that go far beyond cryptocurrencies. However, scalability remains a significant challenge for many blockchain networks. That's where Layer 2 solutions come into play.  These are secondary protocols built on top of a blockchain (the Layer 1) to increase its capacity and speed. But what are Layer 2 blockchains, exactly? And which one is the best? This article will delve into these questions.

Understanding Layer 2 Blockchains

Layer 2 blockchains, or simply Layer 2s, are protocols that interact with a base blockchain layer (Layer 1) to enhance its capabilities. They do this by taking some of the computational work off the main chain and handling it separately. 

This can greatly increase the speed of transactions and lower fees, two factors that are critical for blockchain networks to scale and cater to a larger user base.

How Do Layer 2 Blockchains Work?

Layer 2 blockchains essentially perform most of their operations off-chain and then record the final outcomes on the main chain. This approach, also known as off-chain computation, results in faster transactions and less congestion on the main chain.

For instance, imagine a casino where each player's every move was recorded on a ledger. That would be similar to Layer 1. Now, imagine instead that the casino simply recorded the final outcomes of the games. That would be akin to Layer 2.

Types of Layer 2 Solutions

There are several types of Layer 2 solutions, but the most common ones include Channels, Sidechains, and Rollups.

• Channels are like private lines of communication between parties. Only the participants need to know about the details of the transactions. The opening and closing of the channel are the only transactions that are recorded on the main chain.
• Sidechains are separate blockchains that run in parallel to the main chain. They can operate with different rules and even different consensus algorithms. Tokens can be transferred from the main chain to the sidechain and back.‍
• Rollups are a more recent development. They batch many transactions into a single one, greatly reducing the space they take up on the main chain. This, in turn, reduces fees and increases transaction speed.

Evaluating Layer 2 Blockchains

Determining the "best" Layer 2 blockchain can be subjective as it often depends on the specific needs and constraints of a project. However, here are some key factors to consider:

• Scalability: A good Layer 2 solution should increase the transaction throughput of the base layer significantly.
• Security: It should inherit the security properties of the Layer 1 blockchain or have robust security mechanisms of its own.
• Decentralization: The solution should not compromise on the principles of decentralization.
• Ease of Use: It should be relatively easy for developers to build on and for users to interact with.
• Interoperability: It should ideally be able to interact with other blockchains and Layer 2 solutions.

Notable Layer 2 Solutions

Now, let's take a look at some of the most notable Layer 2 solutions currently in the market.

Polygon (Ethereum)

Polygon, previously known as Matic Network, is a Layer 2 solution for Ethereum. It provides a framework for building and connecting Ethereum-compatible blockchain networks. Polygon combines the best of Ethereum and sovereign blockchains into a fully-fledged multi-chain system.

Lightning Network (Bitcoin)

The Lightning Network is a Layer 2 solution for Bitcoin. It uses state channels to conduct off-chain transactions. This makes Bitcoin transactions faster and more cost-effective, thus addressing Bitcoin's scalability issues.

Optimism (Ethereum)

Optimism is another Layer 2 solution for Ethereum that aims to provide low-cost and lightning-fast transactions. Built by Ethereum developers for Ethereum developers, it scales Ethereum applications without surprises. Essentially, if it works on Ethereum, it will work on Optimism but at a fraction of the cost​​.

Optimism is also known for its Superchain project. This project aims to maximize interoperability and composability between different chains using the OP Stack and integrate various Layer 2 solutions into a single, cohesive layer​2​.

Moreover, Optimism is more than just a blockchain. It's an experiment in sustainable ecosystem funding fueled by protocol revenue. They have a unique system of Retroactive Public Goods Funding, where if you build for the public good, you get paid. This innovative approach emphasizes the project's dedication to the future of Ethereum and the blockchain ecosystem at large​​.

The Top 10 Layer 2 Blockchains (by usage)

As the Layer 2 ecosystem continues to grow, and as we’ve already covered, various solutions have emerged and are being utilized widely. 

Let's take a look at the top 10 Layer 2 blockchains by usage:

• Polygon zkEVM: The first zero-knowledge scaling solution that is fully equivalent to an EVM​​.
• Optimism: A low-cost and lightning-fast Ethereum Layer 2 blockchain, known for its EVM-equivalent architecture that allows Ethereum apps to scale without surprises​2​​3​.
• Arbitrum: A low-cost Layer 2 solution that is ideal for building secure Ethereum Dapps​​.
• Starknet: A decentralized Validity-Rollup that operates as an Ethereum Layer-2 scaling solution​​.
• ImmutableX: A Layer-2 scaling solution for games and NFTs on Ethereum with low gas fees for minting and trading​​.
• Celer Network: A blockchain interoperability protocol that aims to bring low-cost, fast, and secure off-chain transactions to every blockchain​​.
• Metis: A scalable and sustainable Layer 2 scaling solution developed on the Ethereum Blockchain, designed to handle more complex operations and bigger data sizes​​.
• Cartesi: An application-specific rollup execution layer with a game-changing Linux runtime. It combines the power of Linux and blockchain to enable developers to run scalable DApps​​.
• Eclipse: A customizable rollup provider that lets you "pick and choose" parts of different chains. This flexibility makes it a preferred choice for developers looking to tailor their applications for specific needs​​.
• Reddio: Reddio helps you adopt blockchain technology with easy-to-use Layer 2 zkRollup agnostic APIs, simplifying the process of integrating blockchain solutions into existing systems​​.

Each of these Layer 2 solutions offers unique capabilities and advantages, but they all share the common goal of improving scalability and reducing costs. 

Therefore, the "best" Layer 2 blockchain can vary depending on the specific requirements of the application.

Frequently Asked Questions About L2s

Find commonly asked questions about L2s below;

Is Ethereum a Layer 1 or Layer 2 blockchain?

Ethereum is a Layer 1 blockchain​​.

What are examples of a Layer 2 blockchain?

Some examples of Layer 2 blockchains on Ethereum include Polygon, Arbitrum, and Optimism​​.

Why is Layer 2 necessary?

Layer 2 protocols were created to mitigate congestion on blockchains due to the increasing number of users. These protocols have virtually no capacity limits, increase transaction speeds, lower fees, and make Layer 1 blockchains more efficient​​.

How does Layer 1 compare to Layer 2?

Layer 2 protocols can be thought of as airplanes transporting mail compared to cars. They can handle more transactions and deliver them to the Layer 1 blockchain faster and more cost-effectively​​.

What are rollups, sidechains, and channels?

These are examples of Layer 2 methodologies that interact with the Layer 1 blockchain. Each has advantages and disadvantages, but they all aim to increase transaction speeds and lower fees for Layer 1 blockchains​​.

What is the Blockchain Trilemma?

The Blockchain Trilemma refers to the challenge of achieving scalability, security, and decentralization in a blockchain at the same time. No blockchain has been able to maximize all three of these features without compromising at least one​.

How can developers access Layer 2 networks?

Platforms like Metacommerce provide access to Ethereum, Polygon, IPFS, and other Layer 2 networks, allowing developers to scale decentralized applications to meet user demand​​.

How can I participate in Layer 2 applications?

With tools like MetaMask and Infura, and a suite of blockchain products, it's possible to build applications on Ethereum and participate in DeFi, NFTs, DAOs, and the metaverse on Layer 2 blockchains​.

Conclusion

Layer 2 blockchains are an essential part of the blockchain ecosystem, helping to scale up the capabilities of base layer blockchains, improve transaction speed, and reduce fees. While several Layer 2 solutions exist, each with its unique features and benefits, the "best" one will largely depend on specific project requirements and considerations.

The Lightning Network, Polygon, and Optimism are all notable examples of Layer 2 solutions, each with its unique strengths and applications. The Lightning Network enhances Bitcoin's scalability, Polygon enables a multi-chain system for Ethereum, and Optimism provides a scalable and cost-effective solution for Ethereum developers.

Ultimately, the choice of a Layer 2 solution should be based on a careful evaluation of factors such as scalability, security, decentralization, ease of use, and interoperability. As the blockchain technology continues to evolve, so will Layer 2 solutions, promising an exciting future for the decentralized world.

‍Note: While this article provides a comprehensive overview of Layer 2 blockchains, it's always crucial to do your own research before making any decisions in the blockchain space. The technology is complex and rapidly changing, and what may be the best solution today may not be tomorrow.