Layer 2 solutions are technologies implemented on top of a base blockchain network (Layer 1) to improve its scalability and transaction capacity without altering the core blockchain protocol. These solutions are designed to handle transactions off the main blockchain, thereby reducing congestion and speeding up transaction processing times, all while ensuring the security and decentralization of the underlying blockchain remain intact.

Examples of Layer 2 solutions include state channels, sidechains, plasma chains, and rollups.

Each of these technologies works differently but shares the common goal of offloading transactions from the main blockchain. For instance, state channels allow participants to conduct numerous transactions off-chain, with only the final state being recorded on the blockchain. Rollups batch and process transactions off-chain before submitting a single, aggregated transaction to the Layer 1 blockchain.

By leveraging Layer 2 solutions, networks can significantly increase transaction throughput, reduce gas fees, and provide a better user experience for decentralized applications, making blockchain technology more practical for everyday use and large-scale applications.

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