Layer 2 blockchain solutions

Gepubliceerd op 18 september 2022 om 08:35

In another blog, I discussed the different layers of blockchain. In this blog, I will be more specific about one of the layers, namely the protocol layer. Layer 2 (protocol layer) projects are extremely important in the development of blockchain technology.

What is the layer 2 protocol?

Within the protocol layer falls the consensus mechanism, or consensus algorithm. This also includes the sidechains.

The consensus mechanism is essential to the operation of the blockchain. Through the consensus protocol, transactions can be verified on the blockchain. Each blockchain has a different consensus mechanism. Bitcoin, for example, has the proof of work. In addition, there are numerous consensus mechanisms that can be used. Such as the proof of stake or the proof of elapsed time.

If the main blockchain also has a sidechain, then the main chain should also be able to communicate with this sidechain. This is done through a 'federation'. This federation ensures that when you send crypto from the main chain to the sidechain - the amount of crypto on the sidechain is correct. The federation ensures that the main chain communicates with the sidechain correctly and efficiently.

Why are layer 2 blockchains important?

As is well known, the bitcoin and Ethereum blockchain have scalability issues. That is, the original bitcoin and Ethereum blockchain cannot handle many transactions per second. These blockchains contain these limitations. Also, no one could have known that bitcoin and Ethereum would become so popular. But now that these blockchains are widely used, we can now see the limitations clearly.

For example, because the bitcoin and Ethereum blockchains have become so large, it is very difficult to modify, or up date, the blockchains. Updates do happen now, but these are often smaller updates. An update to change the foundation of the blockchain is extremely difficult. An update can be made by means of a hard fork. With such a hard fork a split of the blockchain has taken place.

By obtaining a layer 2 solution, the layer 1 blockchain can continue to function without changes. The layer 2 solution provides an update to the blockchain. This layer 2 solution can be seen as a new layer on top of the blockchain. There are also different solutions that can be used.

Layer 2 solutions is a good solution to improve the blockchain. Without these layer 2 solutions, it would be difficult to improve the blockchain. It would be very difficult to solve the existing limitations. This could cause the blockchain, in this situation bitcoin and Ethereum to be used much less.

In short:

Layer 2 refers to a secondary framework or protocol that is built on top of an existing blockchain system. The main goal of these protocols is to solve the transaction speed and scaling difficulties that are being faced by the major cryptocurrency networks.

Well-known layer 2 blockchain solutions

The lightning network was created to solve the scalability problem. Lightning Network is a layer 2 blockchain protocol that should solve this problem. The Lightning Network allows the nodes to process more and faster transactions. This makes it possible for more nodes to participate in the blockchain network.

The Lightning Network has been in operation since 2019. The Lightning Network is an incredibly good initiative, but it does not ensure that all the limitations of the blockchain can be solved.

  • Celer Network:

The Celer Network is a layer 2 solution specifically for the Ethereum blockchain (but bitcoin blockchain can also use the Celer Network). Celer also has its own crypto, namely CELR. This crypto can be purchased from the larger crypto exchanges. The Celer network is designed to improve scalability. But it is also meant to make blockchain applications easier, more secure and cheaper to build.

  • Polygon

Polygon is an Ethereum protocol intended for the Ethereum blockchain. Polygon was formerly known as the Matic Network. Polygon was developed to improve the structure and scalability of the Ethereum blockchain. Polygon uses Polygon SDK. This is a framework on which various applications can be built.

  • Funfair

Funfair is a project that makes it possible to play games on the Ethereum blockchain. The protocol of Funfair makes it possible to set up online casinos on the blockchain. The team behind Funfair wants to change the online gaming industry. Currently, games on the blockchain are developing rapidly. There are already games that can be played on the blockchain. Examples include Axie Infinity and Splinterlands. There are many more! Look here for more blockchain games.

The Funfair network uses smart contracts to achieve its goal. Layer 2 solutions don't always have to be in the form of a new protocol. Smart contracts do their job just as well. Funfair wants to use the smart contracts to ensure that all kinds of games can run on different blockchains.

Other, less well known layer 2 solutions (but as important!)

  • Loom Network;
  • Taxa;
  • TEEX.
  • etc...

Key takeaway

Layer 2 projects don't sound that exciting and it's also not that well known to the general public. The general public only knows the well-known blockchains, such as bitcoin or Ethereum blockchain. It is good to remember that layer 2 solutions are incredibly important to keep developing the blockchain. Certain limitations of the blockchain can be largely solved through a layer 2 protocol (by means of smart contracts). That is by placing a new layer over the blockchain. Without these projects, we would not be able to efficiently modify the blockchain.

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