Protocols like Layer 2 Solutions are created on top of current blockchain networks to improve scalability and lower transaction expenses. Layer 2 solutions, such as Optimistic Rollups and Polygon handle transactions off-chain before finalizing them on the main chain. This approach allows for quicker and more affordable transactions without compromising the security and decentralization of the underlying blockchain.
Optimistic Rollups are a Layer 2 solution that bundles multiple transactions together and processes them off-chain, assuming they are valid unless a fraud claim is raised. This technique reduces the computational load on the main blockchain while maintaining a powerful dispute-resolution mechanism if there are any discrepancies. Polygon is another notable solution and a platform for building sidechains that process transactions independently and synchronize with Ethereum’s main chain. Faster transaction speeds and lower fees make this setup a great fit for decentralized applications (DApps), DeFi platforms, and NFT Marketplaces.
Zero Knowledge Rollups, or ZK-Rollups, take the Layer 2 scaling a step further by utilizing cryptographic proofs to prove that transactions happened off-chain, and then submit a compressed proof of the needed information to the main blockchain. This achieves perfection in both efficiency and privacy; only key transaction data is shared, which reduces network congestion and increases user confidentiality at the same time.
For decentralized exchanges (DEXs) and GameFi platforms, Layer 2 solutions provide crucial support if the application needs high throughput. They make blockchain technology more available and usable to mainstream users by enabling more transactions to happen at lower costs. These solutions are off-chain, but still benefit from the security and trustlessness of the main chain through final transaction records settled on Layer 1