What is Layer 2 ?

Layer 2 Blockchain Visual

Layer 2 solutions, also known as off-chain or second layer solutions, are technologies designed to enhance the scalability, speed, and flexibility of blockchain networks. They work by adding a secondary layer on top of the existing Layer 1 blockchain infrastructure, enabling the execution of more complex operations off the primary chain.

The key principle behind Layer 2 solutions is to perform as many operations as possible "off-chain" and then record the final state or outcome "on-chain." This process reduces the load on the main chain, thereby increasing transaction speed and reducing fees.

Examples of Layer 2 solutions include Lightning Network for Bitcoin and Plasma and Rollups for Ethereum.