Layer 2 blockchains are important in the quest for mass adoption

Introduction

Mass adoption of blockchain technology is a real possibility as many new projects spring up everyday. Blockchains continue to find new use-cases and expand on existing ones because it is innovative by design. Most of the services dominated by our traditional system now finds improved solutions in blockchain systems. So we could wake up one day and see that blockchain has gone mainstream.

While mass adoption is the dream of every crypto enthusiast, it is crucial to note that the technology is far from perfect. Even at the current rate of adoption which is far from massive, there are performance and technical challenges that must be overcome. If you have been around in the space, scalability would be the first challenge that could be cited as a popular example. Until such issues are solved, even going mainstream would create more challenges than solve existing ones. How do we get ready for what lies ahead?

This is where the discussion leads us to layer 2 blockchains. With layer 2 blockchains, many of the known challenges of primary blockchains like scalability and high processing fees could be addressed. The innovative use of layer 2 blockchains could be a real turning point in the history and progress of this technology. That too could be a critical and necessary preparation as we anticipate a future where blockchain would go mainstream.

Why do we need another layer of blockchains in the first place? Primary blockchains struggle in more ways than one. Lets dwell on that a little

Layer 1 and known difficulties

A very good example of a layer 1 or primary blockchain is Bitcoin. There are still many others like Ethereum. The arrival of these blockchains marked a radical shift in data ownership, transparency and trustless technology that changed how we transact forever. Over the past decade, progress made both in expanding blockchain use-cases and pushing for mass adoption are remarkable. However, layer1 blockchains by design have some deficiencies. One of them is scalability.

Take note that processing of transactions happen at the layer 1 level. Other things that happen here includes reaching a consensus and storing the block produced. So the critical functions of a blockchain happen at this primary level. However by design, primary blockchains are very difficult to scale and that has been a long-standing design flaw that limits it severely.

In blockchain discussions, Transactions-per-second (TPS) is a term used to describe how many transactions a network could handle each second. This term is used to measure how fast the network is and how much load it could handle in unit term. When we compare the TPS of popular layer 1 blockchains to that of traditional payment processing platforms, then we could appreciate why scalability is a bottleneck.

For the Bitcoin network, the TPS is not more than 7. But when we consider traditional rivals like VISA, the size of layer 1 scalability issue becomes obvious. VISA could handle up to 1700 TPS. Another traditional rival is Mastercard which claims it can handle up to 5000 TPS. This simply means that a spike in the number of users or transactions would lead to a congestion in the blockchain network. Making it inherently slow and leading to yet another challenge - high network fees.

High network fees is another challenge of layer 1 blockchains. This is often noticed when there is congestion on the network. As the number of transactions waiting on the network goes up, then the principle of demand and supply kicks in. Network validators often raise the cost of processing transactions because there is much demand for the resources on the network. Thus, transactions that are able to pay the higher fees are prioritized against ones that settled for the lower fee.

While creating a higher transaction fee is a challenge on its own, it does not solve scalability or make the network faster. The congestion remains, only that transactions that would generate high service charges are handled first. With higher fees, some users might just cancel their transaction. This is because sometimes, the fees are higher than the actual transaction amount and this does not make any sense at all.

So from the above, we notice just two of the major design flaws that primary blockchains contend with till today. Slow network would mean that not all projects could be launched on a primary protocol because of scalability issues. For example, a gaming project or online check out platform with millions of participants require instant processing of transactions. A primary protocol would struggle. And the issue of high processing fees would simple not be feasible for all types of transactions.

Bringing the masses and going mainstream

The push for mass adoption of blockchains is something great for the technology. Besides, there is massive progress already. The number of users, transactions and projects continue to raise by the day. The future of mass adoption may not be far from now. But, it is important to start thinking about the implications and realities of it.

The masses will would come with obvious increase in the number of transactions. Relying on the current nature of layer 1 protocols, mass adoption would not just be feasible. If Bitcoin could handle 7 transactions per second, then it would certainly be a poor choice to implement an event ticketing project for 2 million users trying to buy at the same time. How about an ecommerce platform where millions of customers are trying to check out at the same time. These are just examples of what we mean by mass adoption.

Before the arrival of mass adoption, the technology that powers all the transactions should be able to hold the numbers. And that is where different solutions need to come. One of those solutions that we want to consider right now is layer 2 blockchains.

Layer 2 improves the technology

Layer 2 blockchains represent an innovative solution to the problems of layer 1 protocols. This type of blockchains do not exist independent of primary blockchains. Instead, they are built on the layer 1 blockchains. The essence is to extend the features of layer 1 protocols and attempt to solve known challenges such as scalability and high network fees.

Layer 2 blockchains help solve the scalability issue by decongesting transactions on the primary blockchain and handling it on this second layer. This allows the primary blockchain to focus on other aspects such as storing and updating the final state of the blockchain after transactions. Basically, layer 2 blockchains sit on top of layer 1. They handle the load of transaction processing, but then the results have to be updated on the primary blockchain.

Layer 2 protocols inherit some features of the primary blockchain on which is was built. For example, the security features of the primary blockchain is passed on to the layer 2 blockchain. This ensures that transactions handled on the layer 2 are as secure as those done on the primary level.

Again, layer 2 blockchains also drastically lower the network fees which are often high at the primary level. In addition to the faster transaction speeds, the low network fees will help the blockchain projects to come closer to traditional alternatives such as VISA and Mastercard.

With regards to mass adoption, we see the value that layer 2 blockchains bring. Basing on layer 1 alone, it would be nearly impossible to launch projects that require handling large amount of transactions in record time. But with Layer 2 scaling solutions, it is possible to achieve volume and speed at the same time. In the future, when the masses comes, congestion of blockchain networks would not be an issue if layer 2 solutions are part of a projects ecosystem.

Examples of Layer 2 protocols

The following are popular layer 2 blockchains:

For Bitcoin

• Lighting Network: .

For Ethereum

• Optimism
• Arbitrum
• Polygon (MATIC)
• zkSync

Conclusion

Mass adoption of blockchain technology would be a reality sooner or later. But before that happens, the technology needs to improve massively. Layer 2 solutions help improve speed and processing costs and these are very important if and when the masses do come.