Layer 2

Layer 2 refers to a set of solutions built on top of a blockchain (Layer 1) to improve its efficiency, speed, and cost-effectiveness. It works by handling transactions outside the main blockchain, then recording only the essential summary or final state back on Layer 1. This reduces congestion and fees, enabling faster transactions with lower costs. Common Layer 2 solutions include state channels, sidechains, and rollups. In essence, Layer 2 acts as an overlay that streamlines blockchain activity without compromising security or decentralization.