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Ever since Bitcoin brought about a cryptocurrency revolution in the world since its breakthrough in 2013, when its prices had a 51% increase within 12 days of November, there have been several new blockchain platforms that have emerged in its wake. However, a vast majority of these blockchain platforms face issues related to their scalability due to the challenges of low transactions and high latencies. To address and overcome these issues, blockchain platforms and blockchain technology is often regularly modified with new and improved features being added in the form of layers, and this is where Layer 2 Blockchain Solutions come in.
Layer 2 blockchain solutions are defined as improvements on Layer 1 traditional blockchain solutions which have limitations in their design regarding transaction processing rates, fees, and periods. Because of their numerous features and advantages in comparison with Layer 1 blockchain solutions, Layer 2 blockchain solutions continue to make major strides in the market, with their Total Value Locked (TVL) surpassing the $20 billion mark in 2024.
In this blog, we will be discussing the top most Layer 2 blockchain solutions that have brought about considerable improvements in how blockchain platforms operate. Along with that, we will also be discussing the reasons why Layer 2 blockchain solutions have gained a crucial position in today’s blockchain ecosystems. So let’s begin, shall we?
You must be wondering why there’s such a big deal about Layer 2 blockchain solutions these days. In this section, we will elaborate on the key features and benefits of Layer 2 blockchain solutions that will explain the reasons behind their current prominence:
The primary feature of Layer-2 blockchain solutions is the ability to drastically increase the scalability of blockchain networks. This is achieved by processing transactions off-chain or through secondary layers and periodically consolidating them on the main blockchain. The result is a substantial increase in transaction throughput, allowing blockchain systems to handle thousands of transactions per second (TPS) compared to the low TPS of Layer-1 solutions.
For instance, Ethereum’s Layer-1 can only handle around 15-30 TPS, while Layer-2 scaling solutions like zk-rollups or optimistic rollups can achieve up to 4,000 TPS or more . This scalability is critical for blockchain adoption in areas like decentralized finance (DeFi), gaming, and NFTs.
Layer-2 solutions also bring significant cost reductions by minimizing the gas fees associated with on-chain transactions. By bundling multiple transactions together and settling them in a single batch on the Layer-1 chain, Layer-2 networks can spread the cost across a larger number of users, leading to cheaper individual transaction costs.
For example, Ethereum Layer-2 solutions such as Arbitrum or Optimism have reduced transaction fees by up to 100x compared to on-chain Ethereum transactions . This reduction is crucial for enabling microtransactions and making blockchain-based applications more economically viable.
Faster transactions are another important feature of Layer-2 blockchain solutions. By handling transactions off-chain or in parallel to Layer-1, Layer-2 platforms drastically reduce confirmation times. Transactions can be confirmed in seconds rather than minutes, making Layer-2 blockchains ideal for use cases like payment processing, real-time gaming, and decentralized exchanges (DEXs).
Layer-2 networks like Polygon, for example, are helping reduce transaction confirmation times on Ethereum from several minutes to less than two seconds .
One of the standout benefits of Layer-2 solutions is their security model. Rather than compromising on security for scalability, Layer-2 blockchains inherit the security of the underlying Layer-1 chain. This means that while transactions may occur off-chain or on a secondary network, the final settlement and dispute resolution occur on the Layer-1 blockchain, ensuring a high level of security and trust.
This feature is particularly beneficial for industries that rely on strong security guarantees, such as finance, healthcare, and supply chain management.
Layer-2 solutions are more energy-efficient compared to Layer-1 networks. Since they reduce the need for every transaction to be processed directly on-chain, Layer-2 protocols significantly cut down on the computational energy required to maintain the network. This energy efficiency makes them more sustainable and aligns with the growing global push towards eco-friendly technologies.
For example, using Layer-2 solutions can decrease Ethereum's carbon footprint by over 90% compared to performing all operations on Layer-1 .
Layer-2 blockchains often offer cross-chain compatibility and interoperability. This allows users and developers to move assets between different blockchain networks more easily. For example, Polygon enables interoperability between Ethereum and other chains, allowing seamless asset transfers and interactions across ecosystems.
Interoperability between different Layer-2 and Layer-1 blockchains will be a key driver of growth in blockchain technology adoption across diverse industries.
Many Layer-2 blockchains are fully compatible with smart contracts, enabling decentralized applications (dApps) to operate more efficiently and at scale. Developers can deploy their applications on Layer-2 platforms like Optimism or zkSync without having to rewrite their code, ensuring seamless integration and fast adoption.
This feature is crucial as the number of dApps continues to rise across industries such as gaming, finance, and NFTs. According to recent data, over 70% of the top dApps on Ethereum are now exploring Layer-2 solutions for scalability.
The general use cases of Layer 1 and Layer 2 blockchain solutions might differ, but it is still important to understand which one is a superior choice of solution in general. Here’s a comprehensive comparison between the common features of Layer 1 and Layer 2 blockchain solutions to highlight why Layer 2 is better:
Our list of top Layer 2 Blockchain Solutions in 2024 was created with the following criteria in mind:
The solution's ability to significantly increase transaction throughput (TPS) compared to Layer-1 chains.
The reduction in gas fees and overall transaction costs offered by the Layer-2 solution.
How well the Layer-2 solution inherits or enhances the security of the underlying Layer-1 blockchain.
The speed at which transactions are processed and confirmed, typically measured in seconds.
The number of projects, decentralized applications (dApps), and users currently adopting the solution.
The ability to support complex smart contracts and decentralized applications seamlessly.
How easily the solution allows cross-chain asset and data transfers between Layer-1 and other Layer-2 chains.
The availability of developer-friendly tools, SDKs, and APIs to support integration and innovation.
The solution's ability to minimize energy consumption compared to traditional Layer-1 blockchains.
Based on our aforementioned criteria, we found the following Layer-2 blockchain solutions to be the most suitable and fitting picks for our list:
Here, we will elaborate on our top picks and also explain why we chose them in the first place:
Polygon, which was formerly known as MATIC, is the top-most ranking and leading Layer-2 blockchain protocol that was created to fix the scalability issues of Ethereum. The reason Polygon leads this list is because of its ease in handling transactions on a separate Ethereum-compatible blockchain, followed by returning those transactions back again to the main blockchain. This approach is responsible for significantly lowering the network load on Ethereum.
In addition to this, Polygon is also renowned for allowing users to interact with any dApp on the blockchain network without any congestion issues.
Arbitrum is a popular choice of blockchain platform to overcome the scalability and congestion issues put forth by Ethereum. This layer-2 blockchain solution is designed with an optimistic roll-up technology where most transactions are processed off-chain, and only the transaction data and a roll-up of the summary are submitted to the Ethereum mainnet. It’s this feature that helps reduce Ethereum congestion, thereby allowing for more cost-efficient transactions.
Avalanche is one of the most popular Blockchain networks currently in the market, and it has taken a leap forward into Layer-2 solutions with its central subnets, short for “subnetwork”, which is basically a set of nodes that work together to achieve a singular consensus on transactions that are linked to one or more blockchains. These subnets can also be considered as a network inside of a network, or rather, a network constructed on top of another network with an extensive infrastructure.
This particular Layer-2 blockchain solution has the capability and potential to unlock a whole new door of possibilities in the Layer-2 blockchain space by giving users and developers on the network the power to build custom blockchains and empower Avalanche to scale.
Loopring, the first Ethereum zkRollup to exist on the blockchain, is a Layer-2 protocol built on Ethereum that enhances the overall transaction experience by processing key elements off-chain. By doing so, it significantly boosts Ethereum’s performance, enabling it to handle transactions at a rate 1,000 times faster than Ethereum's native throughput, with fees as low as a fraction of a cent.
Loopring’s primary goal is to address Ethereum’s scalability challenges through two innovative mechanisms: ring-based order matching and zkRollups. Ring-based order matching optimizes transactions by grouping multiple buy and sell orders into circular rings, ensuring efficient trade execution. Meanwhile, zkRollups help alleviate congestion on the Ethereum network by processing transactions off-chain and settling them on-chain in batches. These innovations make Loopring one of the most effective Layer-2 solutions for unlocking Ethereum’s potential.
The OP Mainnet is a fast and cost-efficient Layer-2 blockchain for Ethereum, powered by Optimism. Developed by OP Labs and utilizing its proprietary OP Stack software, it has become one of the most widely-used Layer-2 solutions. As its name suggests, OP Mainnet leverages optimistic rollups—similar to its competitor Arbitrum—allowing for rapid transactions with minimal fees, all while preserving the robust security of Ethereum’s core architecture.
Additionally, like many other Layer-2 solutions, OP Mainnet is fully compatible with the Ethereum Virtual Machine (EVM), enabling seamless integration with Ethereum-based applications.
In this section, we will be drawing a comparison matrix between our chosen picks for the top layer 2 blockchain solutions in 2024 to help you decide which one you can opt for based on your industry requirements or preferences:
A Layer-2 blockchain solution is a secondary framework or protocol built on top of a Layer-1 blockchain (like Ethereum) to enhance scalability and efficiency. It reduces transaction congestion by processing transactions off the main chain, offering faster and cheaper transactions. Layer-2 solutions are crucial for addressing the limitations of Layer-1 blockchains and improving the overall user experience.
For businesses looking to implement or optimize Layer-2 solutions, explore our Layer-2 Cryptocurrency Development Services to help scale your blockchain projects effectively.
Layer-1 solutions refer to the base layer of a blockchain (e.g., Ethereum, Bitcoin), responsible for security and consensus. Layer-2 solutions are built on top of Layer-1, designed to improve scalability and reduce costs without compromising security by offloading the main chain’s transactional load.
The key benefits include:
Popular Layer-2 solutions in 2024 include:
Key factors include:
Popular use cases include:
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