Amidst all of the crypto advancements in the news recently is the growing awareness around Layer 2. Here we break down what Layer 2 is and the high level essentials you need to know about it in order to better understand its functionality and relevance to blockchain technology.

What is Layer 2?

In order to understand what Layer 2 is, you’ll first need to have a general understanding of Layer 1. Layer 1 is simply the first layer or “main” layer of the blockchain. Layer 2 is thus a “second” layer to the blockchain which is used for processing new transactions at a faster rate, while also helping to reduce the workload on Layer 1. Layer 2 is also—generally speaking—much less expensive in terms of fees than Layer 1, and is constantly being iterated upon to create new solutions. One of the biggest novelties to Layer 2 is how the transactions are validated and summarized before they are added to Layer 1, which remains the Layer on which blockchain transactions are “set in stone.”

Why Layer 2?

Layer 2 is sometimes referred to as a sidechain because it functions as an independent blockchain network on it’s own, but also has a channel to Layer 1. Essentially, Layer 2 helps Layer 1 scale. As cryptocurrencies like Ethereum and Bitcoin become more popular, they need to be able to handle an increased number of transactions. Layer 2 provides a scalable solution to handle the increased bandwidth and by helping to enable thousands of small-value transactions that are then stored as a solitary record on Layer 1. This helps slow the growth of Layer 1 and prevents it from becoming too massive and bogged down. If Layer 1 becomes too large, transactions times slow and the user experience becomes less than desirable.

Overview Of Rollups

One of the ways in which Layer 2 is helping to increase the scalability of Layer 1 is through rollups. A rollup takes a large number of transactions, processes and condenses the data on Layer 2 and then posts the transaction onto Layer 1. This helps decrease the number of transactions on Layer 1, which helps maintain and increase the speed of the network with minimal transaction fees and congestion. Like other elements of Layer 2, rollups are constantly being iterated upon, with new and different solutions being generated regularly that help improve the functionality of blockchain technology.

For example, an aggregator is a relatively new element to rollups that help remove invalid transactions from being processed onto a smart contract on Layer 1. Within a one week window, there is an opportunity to provide proof that a transaction was computed incorrectly. This such advancement was never before possible on the initial blockchain technology and is just one example of how Layer 2 is changing the crypto game.

The Future Of Layer 2

All signs point to Layer 2 becoming a mainstay in the future of Layer 1 and blockchain technology. Whether it’s improving the time, efficiency, and bandwidth of Layer 1 transactions, helping games on the block-chain to function, reducing the cost per transaction across the entire blockchain network, or improving scalability without sacrificing security, Layer 2 is an essential component of blockchain technology and the future of Bitcoin and Ethereum. As more and more developers continue to innovate on ways in which to improve blockchain technology and build new and different methods for scalability, Layer 2 will remain at the forefront and the epicenter of this new pioneering innovation.

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