Layer 2 scaling is a term used to describe the different mechanisms used to increase the throughput and efficiency of transactions on blockchain networks. This scaling approach deals primarily with the management of transactions off-chain, so as to reduce the workload of the blockchain network, increase transaction throughput, and lower fees.

Unpacking layer 2 scaling protocols explores the major solutions used in blockchain technology to tackle increased usage and improved blockchain scalability.

How Layer 2 Scaling Works

Layer 2 scaling solutions work by reducing the amount of data that needs to be processed by the blockchain network. One way to achieve this is by creating a transaction channel between two parties that allow them to perform multiple transactions off-chain. These transactions can be settled on the blockchain network once completed, significantly reducing the workload of the network.

The most common mechanism employed in layer 2 scaling involves the use of sidechains. These are separate blockchain networks that interact with the primary blockchain network to process transactions on their own. A sidechain enables users to carry out transactions without utilizing the main blockchain and then batch these transactions and commit them to the main blockchain all at once.

Another layer 2 scaling approach is the use of state channels. A state channel is a communication channel between two parties that allow off-chain transactions to occur. The results of these transactions are recorded off-chain until such a time that the final balance needs to be recorded on the primary blockchain network.

Another mechanism involves the use of plasma chains which are a form of side-chain that is designed to offer superior scalability. It works by allowing the creation of a mini-blockchain, which then has the capabilities to make transactions speedily, as it uses the primary chain only when required.

Why Layer 2 Scaling Matters

The key driver for the development of layer 2 scaling solutions is the need to tackle the issue of scalability, as the current infrastructure of blockchain adoption is currently overwhelmed. For instance, the Ethereum network has a limitation of only processing around 15 to 45 transactions per second (tps), which is not practical for handling high-volume transaction applications such as payment gateways, finance, and other decentralized applications capable of executing thousands of transactions.

The limitations of blockchain technology regarding scalability have inhibited widespread adoption in commercial applications, and this is where layer 2 scaling protocols come in. The use of layer 2 scaling solutions improves the functionality of blockchain networks, allowing high-speed processing of more transactions, lowering transactional fees, and allowing commercial entities to carry out faster and more affordable transactions.

In conclusion, the continued development and implementation of layer 2 scaling solutions are essential to the long-term growth and adoption of blockchain technology. These solutions will enable blockchain networks to effectively scale, improve speed, and lower transaction fees, thereby making the ecosystem suitable for commercial adoption. It is clear that continued efforts towards improving layer 2 scaling capacity will facilitate mainstream adoption, further enhancing the prospects of blockchain technology in the years to come.