What is blockchain layer 2?

In the decentralized blockchain ecosystem, a “layer-2 protocol” refers to a solution that can be used in conjunction with a “layer-1 blockchain“, such as Electra Protocol. A layer-2 solution refers to a network or technology that operates on top of an underlying blockchain protocol to improve its scalability and efficiency. This category of scaling solutions entails shifting a portion of a blockchain protocol’s transactional burden to an adjacent system architecture, which then handles the brunt of the network’s processing and only subsequently reports back to the main blockchain to finalize its results. By abstracting the majority of data processing to auxiliary architecture, the base layer blockchain becomes less congested — and ultimately more scalable.

For instance, Bitcoin is a layer-1 network, and the Lightning Network is a layer-2 solution built to improve transaction speeds in this fashion on the Bitcoin and other compatible networks. Electra Protocol is theoretically also capable of using the Lightning Network, as it is a Bitcoin-based solution.

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Layer-2 scaling solutions

A variety of technological solutions are implemented to achieve 2nd layer scalability, such as:

  • Nested blockchains: A nested blockchain is essentially a blockchain within — or, rather, atop — another blockchain.
  • State channels: A state channel facilitates two-way communication between a blockchain and off-chain transactional channels and improves overall transaction capacity and speed.
  • Sidechains: A sidechain is a blockchain-adjacent transactional chain that’s typically used for large batch transactions. Sidechains use an independent consensus mechanism — i.e., separate from the original chain — which can be optimized for speed and scalability.

Electra Protocol is not using any layer-2 technology, but its platform Evoblox is planning to create layer-2 solutions.