How Do Layer 2 Scaling Solutions like the Lightning Network Reduce Congestion on the Layer 1 Mempool?
Layer 2 solutions move the majority of transactions off the main blockchain (Layer 1). They allow users to conduct numerous transactions instantly and cheaply off-chain, only using the Layer 1 chain for opening and closing channels.
By aggregating many small transactions into two large Layer 1 transactions, they drastically reduce the demand for the limited block space, thus lowering the overall Mempool congestion and fees.
Glossar
Layer 2
Architecture ⎊ Layer 2 solutions, within the cryptocurrency ecosystem, fundamentally represent off-chain scaling methodologies designed to alleviate congestion and enhance transaction throughput on the primary blockchain, often referred to as Layer 1.
Layer 1
Architecture ⎊ The foundational protocol layer establishes the core rules for transaction ordering, consensus, and finality, which underpins the entire ecosystem for derivatives trading.
Mempool Congestion
Capacity ⎊ Mempool congestion arises when the volume of pending transactions exceeds the block space available in a blockchain, creating a backlog and increasing transaction fees.
Layer 2 Scaling Solutions
Definition ⎊ Layer 2 scaling solutions are secondary protocols built on top of a base blockchain, or Layer 1, designed to enhance transaction throughput and reduce costs.
The Lightning Network
Architecture ⎊ The Lightning Network is a Layer 2 protocol built atop Bitcoin, employing bi-directional payment channels to facilitate high-speed, low-cost off-chain transactions.