Layer 2 DeFi

Definition ∞ ‘Layer 2 DeFi’ signifies decentralized finance applications and protocols that operate on secondary frameworks built atop a primary blockchain. These secondary layers, or Layer 2 solutions, are designed to enhance transaction speed and reduce costs, thereby improving the scalability of decentralized finance. They allow for more efficient execution of financial operations than is possible on the base layer alone.
Context ∞ Layer 2 DeFi is a central topic in ongoing discussions about blockchain scalability and the practical usability of decentralized applications. News often reports on the adoption rates of various Layer 2 solutions and their impact on transaction throughput and fees. Critical future developments to monitor include the interoperability between different Layer 2 networks and their ability to support a wider range of complex financial activities.