Layer 2

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Layer 2 refers to the second level of a hierarchical system, a concept prominently used in both computer networking and blockchain technology. In the context of the OSI (Open Systems Interconnection) model for networking, Layer 2 is the Data Link Layer. This layer is responsible for node-to-node data transfer between two directly connected nodes. It handles error detection and correction that may occur in the Physical Layer (Layer 1) and manages how data is placed and retrieved from the physical medium. Common Layer 2 protocols include Ethernet for local area networks and the Point-to-Point Protocol (PPP).

In the blockchain sphere, Layer 2 solutions are protocols built on top of an existing Layer 1 blockchain (like Bitcoin or Ethereum). Their primary purpose is to increase transaction speed and scalability while reducing transaction costs. By processing transactions off the main chain, Layer 2 solutions alleviate congestion on the Layer 1 network. Examples include Bitcoin’s Lightning Network and Ethereum’s rollups (like Optimistic Rollups and ZK-Rollups) and sidechains. These innovations aim to make blockchain technology more practical for everyday use by addressing some of its inherent limitations.

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