What is Layer 2 Blockchain?

Layer 2 is a well-known shared term in the coin market nowadays. People use to describe a specific group of blockchain scaling solutions by that phrase. Layer 2 reduces overcrowding on a Layer 1 blockchain and makes every transaction smooth and hassle-free.

While doing so, Layer 2 never compromises with its base layer security. It just reduces the demand for block space by transferring additional transactions to the layers above the base layer. However, the process makes the transactions even faster and cheaper.

People are getting crazy about this Layer 2 tokens because of its reduced cost and its gradually increasing network applications use cases.


What are the Differences between Layer 1 and Layer 2 tokens?

Although these two categories of cryptocurrencies seem alike, there are some significant yet beneficial differences between them. While Layer 1 crypto tokens are formed in the base blockchain of the main architecture, Layer 2 tokens are formed in the secondary blockchain.

Precisely speaking, both Layer 1 and 2 tokens are combined on top of an existing blockchain network. While Layer 1 tokens focus on security and decentralization, Layer 2 ensures the execution of each transaction is low-cost and fast.

However, one of the main benefits of using Layer 2 cryptocurrency tokens is that the primary blockchain doesn’t need to go through any structural change. Layer 2 works as an extra coat of security and high throughput. In other words, a Layer 2 chain is capable of performing hundreds, or even thousands, of transactions per second.


Examples of Layer 2 Tokens:

We all know that Layer 2 blockchains are becoming increasingly popular because of their improved scalability and efficiency. Most of the well-known Layer 2 tokens are as follows:

Polygon:  It is one of the most popular and largest Layer 2 tokens in the world. Polygon runs parallelly to the Ethereum blockchain. With several consensus technologies including Proof of stake (PoS) architecture, ZK-rollups, Optimistic roll-ups and Plasma chain, Polygon improves the efficiency of crypto transactions.

Arbitrum: This token was founded in May 2021 by Ed Felton. He is one of the former US White House Chief Technology Officers. This Layer 2 token called Arbitrum can make the Ethereum blockchain transaction speed go turbo to 40,000 transactions per sec. Also, it can lower the transaction fees.

Optimism: It is another Layer 2 solution which also settles transactions on blockchain pretty quick and at the lowest cost. It runs in parallel with the Ethereum network and enables crypto developers to build scalable DeFi protocols.

Immutable X: This Layer 2 scaling solution is specifically known for improving the scalability of NFTs on the Ethereum network.

Loopring: Our next Layer 2 token is Loopring which is a groundbreaking solution that significantly amplifies Ethereum’s transaction throughput and slashes gas costs, all the while preserving the robust security we all rely upon.”


How to Invest in Layer 2 Tokens?

Investing in Layer 2 assets is now very much simple and secure than anyone can imagine. You just need to sign up for an exchange and get your very first digital currency. Now, various websites known as faucets also provide free cryptocurrencies just for solving captchas.

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