Layer 2

Layer 2 alludes to a secondary structure or protocol that is based on top of an existing blockchain system. The primary goal of these protocols is to tackle the transaction speed and scaling challenges that are being looked by the major cryptocurrency networks.
For example, Bitcoin and Ethereum are as yet not able to handle large number of transactions each second (TPS), and this is absolutely hindering to their long-term growth. There is a requirement for higher throughput before these networks can be really adopted and utilized on a more extensive scale.
In this unique situation, the term "layer 2" alludes to the different arrangements being proposed to the blockchain scalability problem. Two major instances of layer 2 arrangements are the Bitcoin Lightning Network and the Ethereum Plasma. Regardless of having their own working components and particularities, the two arrangements are endeavoring to give increased throughput to blockchain systems.
In particular, the Lightning Network depends on state channels, which are fundamentally appended channels that perform blockchain operations and report them to the primary chain. State channels are primarily utilized as payment channels. Then again, the Plasma system comprises of sidechains, which are basically small blockchains organized in a tree-like structure.
From a more extensive perspective, layer 2 protocols make a secondary structure, where blockchain transactions and processes can happen freely of the layer 1 (principal chain). Thus, these methods may likewise be alluded to as "off-chain" scaling arrangements.
One of the principal benefits of utilizing off-chain arrangements is that the primary chain doesn't have to go through any structural change on the grounds that the subsequent layer is added as an extra layer. Thusly, layer 2 arrangements can possibly accomplish high throughput without forfeiting network security.
All in all, a great portion of the work that would be performed by the primary chain can be moved to the subsequent layer. So while the primary chain (layer 1) gives security, the subsequent layer offers high throughput, having the option to perform hundreds, or even thousands, of transactions each second.