Layer 2 networks are structural solutions built on top of the Ethereum main network (known as Layer 1) aimed at improving transaction speed and reducing costs, without compromising the security or decentralization of the network. Imagine Layer 1 as a congested main road; Layer 2 builds side roads or bridges to move traffic more quickly and at a lower cost.
How do Layer 2 networks work?
Rollups: Aggregate thousands of transactions off the main chain and then send aggregated data once to Ethereum. This reduces fees and speeds up performance.
State Channels: Open a channel between two parties for near-instantaneous repeated transactions, and record the final result on the main chain.
Sidechains: Independent networks compatible with Ethereum, allowing for fast trading, with decentralized links to the main node.
The Importance of Layer 2 in Ethereum
Reducing fees: Gas costs on Layer 2 are significantly lower, making daily use (like decentralized gaming and small trading) accessible.
Capacity Increase: With congestion on Layer 1, Layer 2 adds thousands of transactions per second, opening the door to high-performance DeFi services and NFT platforms.
Improving user experience: Transaction confirmation time reduces from minutes or tens of minutes to seconds or less.
In summary, Layer 2 networks enhance Ethereum's scalability and reduce costs, supporting the proliferation of decentralized applications and bringing them closer to widespread daily use.