Read More: What Is Layer 2?
Blockchain networks, like Bitcoin and Ethereum, face scalability challenges due to their inherent design. While Bitcoin still utilizes the Proof of Work (PoW) consensus algorithm, Ethereum has transitioned to the Proof of Stake (PoS) consensus mechanism with the launch of Ethereum 2.0.
Although PoS offers better scalability compared to PoW, Ethereum still faces limitations in terms of transaction throughput. That’s why developers planned the introduction of sharding in the coming months.
PoW can process only a limited number of transactions per second, with Bitcoin averaging 7 TPS and Ethereum 20 TPS. In contrast, traditional centralized systems, such as VISA, can process more than 24,000 TPS. These limitations lead to increased transaction fees and longer settlement times, creating the need for Layer 2 scaling solutions.
The “blockchain trilemma” refers to the challenge of achieving decentralization, security, and scalability simultaneously in a public blockchain network. Increasing scalability often compromises decentralization or security.
Layer 1 solutions, like Ethereum’s transition from PoW to Proof of Stake (PoS) and sharding, aim to address these challenges. However, Layer 2 scaling solutions are necessary to further enhance throughput without compromising the core characteristics of the original blockchain.
Layer 2 scaling solutions work on top of the base layer (Layer 1) of a blockchain network to improve its capacity, transaction speed, and overall efficiency. These solutions include state channels, rollups (optimistic and zero-knowledge), and plasma chains.
By moving some data and computation off-chain, Layer 2 solutions enable higher transaction throughput, reduced fees, and faster processing times.
Read More: What Is Layer 1
Arbitrum, and Optimism are three well-known Layer 2 scaling solutions supported by the Ethereum network. To process transactions faster than the primary Ethereum network, these solutions rely on the development of secondary networks, such as sidechains.
One of the most popular Layer 2 Ethereum solutions, operates as a sidechain connected to the Ethereum network, enabling faster transactions with lower fees and increased capacity. It also provides a simple platform for developers to create dApps and smart contracts.
Let us first introduce Across Protocol, an innovative hybrid bridge solution, to better understand the differences between Layer 1 and Layer 2 solutions. Across Protocol connects Ethereum’s Layer 2 and Layer 1 scaling solutions, allowing tokens to move freely between them. To provide users with a seamless experience, this hybrid solution combines the best features of Layer 1 and Layer 2 solutions.
Key features of the Across Protocol include:
Read More: What Is Layer 2?
Blockchain networks, like Bitcoin and Ethereum, face scalability challenges due to their inherent design. While Bitcoin still utilizes the Proof of Work (PoW) consensus algorithm, Ethereum has transitioned to the Proof of Stake (PoS) consensus mechanism with the launch of Ethereum 2.0.
Although PoS offers better scalability compared to PoW, Ethereum still faces limitations in terms of transaction throughput. That’s why developers planned the introduction of sharding in the coming months.
PoW can process only a limited number of transactions per second, with Bitcoin averaging 7 TPS and Ethereum 20 TPS. In contrast, traditional centralized systems, such as VISA, can process more than 24,000 TPS. These limitations lead to increased transaction fees and longer settlement times, creating the need for Layer 2 scaling solutions.
The “blockchain trilemma” refers to the challenge of achieving decentralization, security, and scalability simultaneously in a public blockchain network. Increasing scalability often compromises decentralization or security.
Layer 1 solutions, like Ethereum’s transition from PoW to Proof of Stake (PoS) and sharding, aim to address these challenges. However, Layer 2 scaling solutions are necessary to further enhance throughput without compromising the core characteristics of the original blockchain.
Layer 2 scaling solutions work on top of the base layer (Layer 1) of a blockchain network to improve its capacity, transaction speed, and overall efficiency. These solutions include state channels, rollups (optimistic and zero-knowledge), and plasma chains.
By moving some data and computation off-chain, Layer 2 solutions enable higher transaction throughput, reduced fees, and faster processing times.
Read More: What Is Layer 1
Arbitrum, and Optimism are three well-known Layer 2 scaling solutions supported by the Ethereum network. To process transactions faster than the primary Ethereum network, these solutions rely on the development of secondary networks, such as sidechains.
One of the most popular Layer 2 Ethereum solutions, operates as a sidechain connected to the Ethereum network, enabling faster transactions with lower fees and increased capacity. It also provides a simple platform for developers to create dApps and smart contracts.
Let us first introduce Across Protocol, an innovative hybrid bridge solution, to better understand the differences between Layer 1 and Layer 2 solutions. Across Protocol connects Ethereum’s Layer 2 and Layer 1 scaling solutions, allowing tokens to move freely between them. To provide users with a seamless experience, this hybrid solution combines the best features of Layer 1 and Layer 2 solutions.
Key features of the Across Protocol include: