What is Layer 2
Layer 2 is a collective term for solutions designed to help scale applications by handling transactions off the main Ethereum chain (Layer 1). Transaction speed suffers when the network is busy, making the user experience poor for certain types of dApps.
Why Layer 2 Matters
The Ethereum mainnet processes roughly 15 transactions per second. For a global financial system, this is insufficient. Layer 2 solutions like optimistic rollups and zk-rollups can increase throughput to thousands of transactions per second while inheriting the security of the base chain.
Types of Solutions
The primary categories of Layer 2 scaling solutions are rollups (both optimistic and zero-knowledge), state channels, and sidechains. Each approach makes different tradeoffs between security, decentralization, and throughput.