Explanation of Defi Layer 2

If you watch the defi closely probably come across the term of Layer 2. In layer 1 and layer 2, the crypto natives talk about the blockchain. Layer 1 describes Bitcoin and Ethereum and it settles the transaction in the network. Layer 2 is the framework that builds the blockchain on the top of the network. This plays a major role and it improves the scaling.

What is layer:

Ethereum created a financial system that sees anything in the world you have seen before and also it suffers from some document problems.

The current iteration process is 15 transactions per second. Several issues are caused and the network gets congested, sometimes extremely high gas is pushing out.

Now the time blockchain is secured, decentralized, and also scalable. They have multiple ways to improve the transaction speed and also by using more powerful nodes.

Ethereum 2.0 improves the scalability and still, it takes time to upgrade to complete this. Ethereum transactions reach a peak at around 1M transaction daily.

At the top, layer 2 is built and it increases the scalability.

At layer 1 the bitcoin and the ethereum are settled at the transaction network.

Sometimes layer 2 needs ethereum to achieve wider and layer 2 increases the transaction speed and also scalability in the main chain.


Channel makes multiple transactions in the off-chain and it submits only 2 transactions at the settlement layer (ie) Ethereum.

Ethereum allows high throughput at the limitation and the participants need an advance to deposit funds in the multi-sig contract. The network is regularly monitored to ensure the funds are safe. It does not allow more open participation because it takes time to set up the channel between users.

There are 2 types of channels, they are.

  • State channels

Final Thoughts:

To resolve some ethereum scaling issues that aim at Layer 2, To improve the network scalability it takes some hybrid solution to combine with technology.

Ethereum achieves full potential as it becomes a trust layer in the combination of ethereum 2.0.





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