Layer-2

Layer-2 is a technology developed to operate on top of a Layer-1 blockchain network, offering improved efficiency, scalability, and cost-effectiveness. Also known as scaling solutions, Layer-2 blockchains utilize the underlying infrastructure provided by the base Layer-1 networks but can deliver higher throughput, lower transaction costs, and more scalability.

 

Layer-2 scaling solutions have become popular as blockchain technology's adoption increases worldwide, leading to network congestion issues and rising transaction costs. Layer-2 networks could also offer a more efficient consensus mechanism, such as proof of stake against Layer-1 networks, which employ energy-intensive proof of work consensus. 

 

Ethereum is one of the leading blockchains that has seen the most innovation in terms of Layer-2 blockchain solutions. Some popular Layer-2 scaling solutions for the Ethereum blockchain include Arbitrum, Polygon, and Optimism. Meanwhile, Bitcoin's Layer-2 solution is called Lightning Network.