Why Ethereum Layer 2 Is Important

As increasing activity brings in more developers to Ethereum, this could also mean a rise in the number of new decentralized applications. Interest in the Ethereum blockchain has soared over the past year, as developers have turned to it to create a wave of decentralized finance projects known as DeFi and unique digital tokens called NFTs.

The Ethereum network’s capacity is severely limited. The network’s maximum capacity of only around 15 transactions per second has meant that, at busy times, the so-called gas fees to use it have been bid up to high levels, squeezing out all but the most high-value transactions. The layer 2 solution was created to address this problem and has come to play a much bigger role on the network.

Layer 2 is a term used for solutions created to help scale an application by processing transactions off the Ethereum Mainnet (layer 1) while still maintaining the same security measures and decentralization as the mainnet. Layer 2 solutions increase throughput (transaction speed) and reduce gas fees.

Layer 2 solutions are important because they allow for scalability and increased throughput while still holding the integrity of the Ethereum blockchain, allowing for complete decentralization, transparency, and security while also reducing the carbon footprint.

Although the Ethereum blockchain is the most widely used blockchain and arguably the most secure, that doesn’t mean it doesn’t come with some shortcomings. The Ethereum Mainnet is known to have slow transaction times (15 transactions per second) and expensive gas fees. Layer 2s are built on top of the Ethereum blockchain, keeping transactions secure, speedy, and scalable.

Each individual solution has its own pros and cons to consider such as throughput, gas fees, security, scalability, and of course, functionality. No single layer 2 solution currently fulfills all these needs. However, there are layer 2 scaling solutions which aim to improve all these aspects.

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