What are layer 2 blockchain solutions and how do they ?

Off-chain solutions, sometimes referred to as layer 2 blockchain solutions, are frameworks or protocols that are constructed on top of Layer 1 blockchain networks to increase scalability and transaction throughput. The drawbacks of Layer 1 blockchains, such as their high fees and lengthy confirmation times, are addressed by these alternatives.

While retaining the security and decentralization of the underlying Layer 1 blockchain, Layer 2 solutions operate by offshoring some of the transaction processing or computation. These remedies can be divided into several categories:

1. Participants can conduct a number of transactions off-chain using state channels, only completing the final transaction on the Layer 1 blockchain. Funds are locked by participants in a blockchain-based smart contract, after which transactions take place rapidly and secretly within the channel. Only the final result is disclosed and recorded on the blockchain, which lowers the total volume of transactions on the main chain.

2. Payment channels: A particular class of state channel known as the “payment channel” is employed to carry out routine, low-value transactions like micropayments. A direct channel can be created between two parties, allowing for low transaction costs and immediate confirmation. Upon closing the channel, the final channel state is recorded on the Layer 1 blockchain.

3. Sidechains: By using two-way pegging, sidechains are independent blockchains that…