In recent years, blockchain technology has been booming, and numerous use cases have been discovered, from cryptocurrency to supply chain management, to voting systems. One of the most important characteristics of the blockchain is its decentralization capability, which allows a secure and transparent system that can operate without the need for intermediaries.

However, as many people are aware, scalability is a major issue for most blockchain projects, including Ethereum, which has become the go-to platform for decentralized applications (dApps). Ethereum’s scalability is currently being addressed with a range of Layer 2 scaling solutions.

These Layer 2 scaling solutions are designed to help Ethereum and other decentralized projects scale, by providing additional processing power, which allows them to handle more transactions per second (TPS) and thus, substantially reduce transaction fees. They achieve this by implementing off-chain mechanisms that allow users to transact and validate without interacting directly with the underlying blockchain.

The mechanisms that Layer 2 scaling solutions use to achieve this scaling are varied, including sidechains, state channels, and Plasma.

Sidechains are separate blockchains that are linked to Ethereum. They can be used for specific applications or functions, and they enable Ethereum-based dApps to reduce their on-chain load, by allowing them to conduct transactions off-chain. This also enables custom scaling solutions to be developed, according to the specific needs of the projects. Sidechains are interconnected to the main Ethereum blockchain by smart contracts which can be executed on both the main chain and the sidechain.

State channels are a second off-chain solution that is already being used on the Ethereum blockchain. They enable users to conduct frequent transactions between two parties without requiring each of those transactions to be written to the blockchain. Instead, the transactions are recorded off-chain, and they are only published to the blockchain when the channel is closed.

Plasma is another off-chain scaling solution that is designed to support more complex applications. It is a framework that enables the creation of child chains that can handle high volumes of transactions inexpensively. It can also support atomic swaps between the child chain and the main blockchain.

The benefits of Layer 2 solutions are numerous. They are cost-effective, making transactions cheaper for users while also making it possible to support more users and transactions on the blockchain. They are faster, enabling near-real-time transactions, which is critical in many applications, and they also enable more complex and advanced features.

In the near future, we will see more decentralized projects being developed that require high-speed transactions and large-scale data processing. These projects will need to conduct secure transactions on a decentralized computer network that scales according to their needs. Layer 2 scaling solutions such as those discussed above will provide an essential element for these projects, and their development is critical for the growth and success of decentralized applications.