Layer 2 (L2) in cryptocurrency refers to solutions built on top of existing blockchains to improve scalability and transaction speed. These solutions aim to alleviate congestion on the main blockchain network by processing a higher volume of transactions off-chain. One common example of Layer 2 technology is the Lightning Network for Bitcoin, which enables faster and cheaper transactions by conducting them outside of the main blockchain.
L2 solutions operate independently but are ultimately settled on the underlying blockchain, which strengthens security and reduces the risk of fraud or manipulation. By moving transactions off the main chain, L2 solutions can achieve higher transaction throughput without compromising decentralization or security.
Overall, Layer 2 technology plays a crucial role in addressing scalability issues without sacrificing the core principles of blockchain technology. It offers a way to enhance the efficiency of transactions and improve the overall user experience in the cryptocurrency space.
