Layer 2

There are various Layer 2 scaling solutions, and they can be categorized into two main types:

1. Off-chain solutions: These involve transactions that occur outside the main blockchain. The most common type of off-chain solution is the use of state channels, where participants conduct transactions off-chain and only settle the final result on the main blockchain. Lightning Network, which is designed for Bitcoin, is a notable example of an off-chain Layer 2 solution.
2. Sidechains: These are separate blockchains that are pegged to the main blockchain. Users can move assets between the main chain and the sidechain to perform transactions more quickly and with lower fees. Examples of sidechain solutions include projects like Liquid for Bitcoin and the Plasma framework for Ethereum.

Layer 2 solutions aim to improve the efficiency of blockchain networks by reducing the number of on-chain transactions and minimizing the need for every action to be recorded directly on the main blockchain. This can lead to increased transaction throughput, lower fees, and faster confirmation times, making the overall blockchain ecosystem more scalable and user-friendly.