How Does ‘Layer 2 Scaling’ Fundamentally Differ from ‘Layer 1 Scaling’?
Layer 1 scaling involves increasing the base blockchain's capacity (e.g. larger blocks, sharding). Layer 2 scaling involves building protocols on top of the base chain to handle transactions off-chain, then periodically settling the state back to Layer 1.
Layer 2 prioritizes scalability while inheriting Layer 1's security.
Glossar
Scaling
Amplitude ⎊ Scaling, within cryptocurrency derivatives, options trading, and financial derivatives, fundamentally concerns adjusting position sizes relative to market volatility and risk appetite.
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.
Layer 2 Scaling
Scaling ⎊ Layer 2 scaling refers to a collection of technologies designed to increase the transaction throughput of a base blockchain without altering its core protocol.
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.