What role does Layer 2 play in the growth of cryptos?

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What role does Layer 2 play in the growth of cryptos?

layer 2 crypto, Layer 2 crypto examples, Ethereum Layer 2 scaling solutions
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Highlights

  • In recent years, blockchain has emerged as one of the world's most intriguing emergent technologies.
  • Layer 2 is the moniker given to all blockchain scaling solutions that are constructed on a layer behind the blockchain's main net.
  • Ethereum Plasma and Bitcoin Lightning Network are two important examples of layer 2 solutions.

The crypto fever has swept the globe. The success of crypto in meeting people's expectations can be attributed to advanced technology. When compared to cryptos, traditional cash payments are not as technologically advanced.

Let's take a look at how technologically enhanced blockchain and Layer 2 are currently fuelling crypto's rise.

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What is Layer 2 technology?

In recent years, blockchain has emerged as one of the world's most intriguing emergent technologies. Layer 2 is the moniker given to all blockchain scaling solutions that are constructed on a layer behind the blockchain's main net. The goal is to offload some of the transactional burdens off the blockchain network.

Ethereum Plasma and the Bitcoin Lightning Network are two important examples of Layer 2 solutions. Despite their distinct functioning principles and characteristics, both technologies aim to boost the throughput of blockchain networks.

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How does Layer 2 contribute to the growth of cryptocurrency?

Let's have a look at the features of Layer 2.

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Plasma

Plasma is a suggested method that builds a network of side chains beneath the main Ethereum network, forming a tree-like structure.

State channels

State channels are meant to overcome scalability issues by acting as a "private off-chain channel" through which, users communicate or transact. State channels are used for both state updates and payments, such as voting.

Sharding

Sharding splits transactions into "shards," with each shard validated by a separate group of nodes. As a result, each node's computing load will be considerably decreased, enabling the network to scale rapidly.

Meta Transactions

Some Layer 2 blockchain solutions can also target usability in addition to scalability. Meta transactions, for example, seek to eliminate gas prices, which are a major impediment for Ethereum users.

Outlook

Layer 2 blockchain technology is a boon for cryptocurrencies. Despite the risks associated with crypto investments, people are becoming more interested in them as a result of the technology's power.

 

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