Layer 2 scaling is a type of blockchain scalability solution that allows for improved transaction throughput on the underlying blockchain. It does this by moving transactions off-chain, leaving only essential data on the main chain. This reduces the amount of data stored and processed on the network and thus increases performance, allowing more transactions per second to be processed without compromising security or decentralization.
In order to understand Layer 2 scaling better, it helps to first look at how blockchains process transactions: When someone sends a transaction from one wallet address to another, it has to be validated by miners who add it into a new block in order for it to become part of the permanent record (the blockchain). The problem with this is that each miner needs time and resources in order to validate each transaction — resulting in increased delays as more people use the network.
Layer 2 solutions solve this problem by taking some of these transactions off-chain while still ensuring they are secure and tamper-proof. These off-chain solutions can provide faster settlement times at lower cost than traditional on-chain processing because they don’t require miners’ validation; instead, participants interact directly with one another in an automated way using smart contracts or other protocols. By doing so, they reduce congestion on the main blockchain while also making sure all parties involved are able to securely transact with confidence — even if there’s no trust between them beforehand.
The most popular Layer 2 protocols today include Bitcoin’s Lightning Network (LN) and Ethereum’s Plasma protocol — both of which allow users to send payments over their respective networks quickly and cheaply without burdening those networks with extra traffic or compromising their security standards. There are also other Layer 2 solutions being developed for specific applications such as decentralized finance (DeFi) platforms or gaming projects like Decentraland or CryptoKitties which leverage custom protocols designed specifically for their needs.
Overall, Layer 2 scaling is an important development when it comes to improving cryptocurrency adoption since its faster speeds make digital assets much easier and smoother experience than before thanks its ability move certain types of activity away from congested public chains onto private channels that have fewer limitations regarding speed but still maintain a high level of security through cryptographic signatures used during interaction between channel members
