Many people are entering the cryptocurrency space and are probably wondering about the value of the so-called Ethereum Layer 2 Protocols in blockchain technology. It’s actually a fascinating topic so let’s take a deep dive into it and see what we can find, shall we?
What is Ethereum?
For the benefit of the newbies, Ethereum is a kind of cryptocurrency asset based on blockchain technology. Wikipedia actually defines it as “a decentralized blockchain with smart contract functionality”.
The real open-source software of Ethereum, meaning the cryptocurrency that you will probably be exposed to, is called the ETH or ether. Ethereum is the brainchild of Vitalik Buterin, a programmer.
What are Layer 2 protocols?
The so-called “Layer 2 protocols” is the second layer of blockchain technology founded on the Layer 1 protocols. What’s the difference? Well, the Layer 1 protocols are the base of the blockchain technology itself.
But since the increase in transactions using the Layer 1 protocols would slow down the progress of the blockchain itself, it was decided that another layer of blockchain technology would help speed up transactions within the Layer 1 protocols. That became the Layer 2 protocols.
What does “Ethereum Layer 2 Protocols” refer to?
As explained earlier, the Layer 2 protocols are necessary to make the flow of transactions speed up. What laymen probably do not know yet is that Ethereum itself is said to be hampered in two areas which are security and scalability. Hence, the idea behind the Ethereum Layer 2 protocols is to help address these two concerns. Simply put, the Layer 2 protocols should help make Ethereum less vulnerable that way.
But you may be wondering: “Why would anyone go to the trouble of creating these Ethereum Layer 2 protocols in the first place? Why not just rely on the Layer 1 protocols all the time?”
The answer is that more and more people are patronizing the Ethereum blockchain as time passes. This means that the Layer 1 transactions are also increasing in volume, which makes the network itself slow down in a noticeable way.
Rather than let the Ethereum blockchain get more and more congested, the Layer 2 protocols take off some of the burden from the Layer 1 protocols and handles that part itself. This makes it more manageable and accommodates the users of the Ethereum blockchain too.
But you may protest “What if we don’t use the Layer 2 protocols at all? Why not just let it be?”
Obviously, if the Layer 1 protocols get too crowded, even the most basic of transactions would take a longer time to be completed. Less people would be able to use the Ethereum blockchain, making the blockchain itself less useful and less convenient.
So, that might spell the end of the Ethereum blockchain itself. After all, users could switch to any of the remaining kinds of cryptocurrencies available out there. So, the proponents of Ethereum decided to invent the Layer 2 protocols to guarantee that people would still be using Ethereum in the near and distant future.
Benefits of Ethereum Layer 2 Protocols
There are four benefits that are brought about by the invention and use of these Layer 2 protocols. First, it brings about cost savings because people will still keep using the Ethereum blockchain. Second, the transactions speed up making it more practical for users to rely on Ethereum for their time-sensitive transactions. Third, scalability becomes more realistic as well. And fourth, security is also achievable.
The Future of the Protocols
So does this mean that Layer 1 protocols will be phased out in favor of Layer 2 protocols, at least for the Ethereum blockchain itself?
Actually, it is still necessary to have Layer 1 protocols because these have specific functions. For example, Bitcoin is still considered made up of Layer 1 protocols and this cryptocurrency is still the most popularly transacted cryptocurrency.
No one will think of phasing out Bitcoin so it is safe to say that Layer 1 protocols have their place. It’s just a complicated matter of finding out which functions of the blockchain should remain with the Layer 1 protocols and which should be assigned to the Layer 2 protocols. That’s for the validators of blockchain technology to figure out as time passes and more work is done.
Will there possibly be a need to create another layer that we can call “Layer 3 protocols”? Well, back when there were just Layer 1 protocols and nothing else, no one actually predicted that Layer 2 protocols would become a practical necessity.
But then it became necessary to create these. So it may be that at some point someone will decide that another layer would be very functional and useful to add to the network. However, it is too soon to declare that as a definite goal. It’s just possible though.
Laymen might want to tap into the value of the Ethereum blockchain network despite not being aware of what the Ethereum Layer 2 protocols do for their transactions. However, if you are thinking of gaining a more in-depth awareness of this kind of crypto technology, hopefully this article will have clarified the issue for you so that you can master cryptocurrency concepts more readily.