Layer 2 solutions are needed to help Ethereum scale. They work by off-loading some of the work from the main Ethereum blockchain to a sidechain or other parallel system.
This can help improve speed and reduce costs.
There are a few different types of layer 2 solutions being developed. These include:
Plasma – Plasma is a framework for creating sidechains. It is being developed by OmiseGO and can be used to create scalable decentralized applications (dapps).
NOTE: WARNING: Ethereum Layer 2 coins, while potentially offering high returns, can be extremely risky investments. They may be subject to high volatility and lack of liquidity. It is important to thoroughly research and understand the project and its associated risks before investing. Investing in Ethereum Layer 2 coins should only be done with funds you can afford to lose.
Raiden Network – The Raiden Network is an off-chain scaling solution for Ethereum. It uses payment channels to allow for fast, cheap, and private transactions.
Sharding – Sharding is a way of partitioning the Ethereum blockchain so that each node only needs to process a small portion of the total data. This can improve scalability by allowing more transactions to be processed in parallel.
State channels – State channels are another type of off-chain solution. They allow two parties to transact without putting all the data on the blockchain.
This can be used to create dapps that are more private and scalable.
Ethereum layer 2 solutions are still in development and are not yet ready for production use. However, they hold promise for helping Ethereum scale without sacrificing decentralization or security.
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