What are Layer 2s?

Blockchain tech is revolutionizing many sectors, from supply chain to voting to finance. As global adoption grows, however, their scalability remains an important hurdle. 

Layer 2s have emerged as one important technique to overcome this. They exist as a layer on top of the main Cardano blockchain. Layer 2s boost blockchain scalability by handling transaction processing off-chain. Once processed, transactions are periodically batched and settled to the main Cardano blockchain. This allows Cardano to process more transactions without affecting its base security or decentralization.

Layer 2s can also provide additional benefits such as lower transaction fees, better user experience, and enhanced privacy. There are different methods to create Layer 2s that each have their own tradeoffs. Common implementations on Cardano include state channels (Hydra) and zero-knowledge proofs (Midgard, zkFold, etc).