The Impact of Layer 2 Networks in The Blockchain Industry

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DeFi ecosystem, you’d agree with me that it’s significantly and continuously transforming through the integration of Layer 2 (L2) network solutions. All thanks to Ethereum — the world's biggest blockchain platform. Through this platform, innovative transformations of this kind are possible: Improved DeFi ecosystem, enhanced scalability, reduced transaction costs, and empowers both brokers and users.

Layer 2 network solutions can be referred to as secondary frameworks or protocols built on a primary blockchain network (known as Layer 1). From all indications, Layer 2 solutions aim at enhancing scalability and efficiency of the blockchain network by processing certain transactions or computation without compromising security and decentralization of the underlying Layer 1 network. While there are so many ways layer 2 solution has affected the blockchain industry, here are two major revolutionary impacts: 1: Primarily, Layer 2 solutions intend to lessen the limitations of Layer 1 blockchains which are: slow transactions processing and high cost.

By moving some transactions off-chain, L2 solution can obviously increase the throughput and at reduced cost. 2: With Layer 2 solutions, DeFi brokers can offer their users a more cost-efficient and accessible trading experience. Users can gladly participate in DeFi protocols without being hindered by exorbitant costs or waiting for long confirmation times.

All thanks to L2 solutions. Cryptopolitan simplified them better and they are as follows: 1: State Channels: This particular type enables participants to conduct a series of transactions off-chain, with only the initial and final states being documented on the layer 1 blockchain. Well, this lessens the number of on-chain