People of the cryptoverse are all a buzz with layer 2s. What are they?
If you’ve been seeing posts from the cryptoverse over the last weeks, you've noticed a lot of references to “layer 2” blockchain. If the headlines made you stop and think, then lets break it down. Layer 2s what are they and what are they for. Known L2s are Lightning Network, Optimism and Arbitrum.
Well, what is a layer 1?
Peer to peer, public ledger without the need for a bank.
L1s are Ethereum, Avalanche, Bitcoin, and Cardano make blocks, verify transactions, and rely on native crypto to secure the network.
Scalability is the limitation for L1s. Increase of usage (crypto bull run and nft craze), L1s can have issues like slower speeds and higher gas fees.
Layer 2s are like the passing lanes on a highway. Separate blockchain built on L1s while reducing network congestion, provide lower fees and improved scalability.
L2s scales solutions for Ethereum. Ethereums network has been known to carry high gas fees during bull runs, when users are willing to pay higher costs to complete transactions.
Best known L2s for Ethereum are Arbitrum and Optimism.
Best known L2 for Bitcoin is the Lightning Network, that powered things like Twitter's tipping feature aswell as global remittance in places like Nigeria and the Philippines.
Why is everyone talking about L2s?
Scroll, a new Ethereum L2 debuted on Feb 27 2023. Scroll is a Zero Knowledge Rollup (ZKR). L2 that enables Ethereum to bundle transactions in a single batch, while creating a faster, cheaper and settlement private transaction.
L2 market leader, Arbitrum became the big dog over Ethereum last week. Daily transactions tipped 2.95 M wallet addresses. Some say this was due to a unconfirmed token airdrop.
Feb 23 2023, Coinbase released Base, a Ethereum L2 built with partnership from layer 2 blockchain Optimism. The new blockchain will bring the next billion users to web3. Doing so by being an open source sandbox for developers building crypto powered apps.
As Defiant put it, with some hyperbole, L2 blockchains are going to enter “a full blown contest for scaling the number 1 smart chain.”