Layer-2 Protocol

Definition ∞ A Layer-2 protocol is a secondary framework or technology built on top of an existing blockchain, known as Layer-1, to enhance its scalability and efficiency. These protocols process transactions off the main chain, then periodically settle the aggregated results back onto the Layer-1 blockchain. Examples include optimistic rollups, zero-knowledge rollups, and sidechains, all designed to alleviate congestion and reduce transaction costs. Layer-2 solutions enable decentralized applications to handle a greater volume of users and operations.
Context ∞ Layer-2 protocols are a constant subject in crypto news, central to the discourse on blockchain scalability and the future of decentralized finance. Their ongoing development addresses the limitations of foundational blockchains, such as high gas fees and slow transaction speeds. The competition among different Layer-2 solutions focuses on security, decentralization, and developer experience. As these protocols evolve, they are expected to facilitate broader adoption of blockchain technology for everyday use cases.