A Layer 2 solution refers to a secondary framework or protocol built on top of a blockchain (Layer 1) like Ethereum or Bitcoin to improve scalability, speed, and efficiency without compromising security

Key aspects of Layer 2 solutions:

1. Off-chain processing:

Layer 2 solutions operate outside the main blockchain (Layer 1) for most of the transaction processing.

2. Increased scalability:

By offloading processing, Layer 2 solutions can handle a significantly higher volume of transactions per second (TPS) than the main blockchain alone.

3. Lower transaction fees:

Reduced congestion on the main blockchain can lead to lower transaction fees, making transactions more affordable.

Security inherited from Layer 1:

i). Layer 2 solutions inherit the security and decentralization of the underlying Layer 1 blockchain, ensuring that transactions are still valid and secure.

ii). Offloads transactions from the main chain (Layer 1) to reduce congestion.

iii). Processes transactions faster and cheaper than the main blockchain.

iv). Eventually settles results on the main chain, preserving decentralization and security.

Examples:

1. Rollups (e.g., Optimistic Rollups, zk-Rollups): Bundle many transactions off-chain and submit a single summary to Layer 1.

2. State Channels: Enable two parties to transact off-chain and only settle the final state on-chain.

3. Sidechains: Independent blockchains that run in parallel and periodically communicate with the main chain.