Coinranking
| # | Coins | Price | 24h | ||
|---|---|---|---|---|---|
| | |||||
| | 51 |  | $ | +20.49%  | |
| | 52 |  | $ | -4.12%  | |
| | 53 |  | $ | -10.66%  | |
| | 54 |  | $ | +13.81%  | |
| | 55 |  | $ | +4.83%  | |
| | 56 |  | $ | -0.30%  | |
| | 57 |  | $ | -0.24%  | |
| | 58 |  | $ | -35.73%  | |
| | 59 |  | $ | +3.50%  | |
| | 60 |  | $ | -3.06%  | |
| | 61 |  | $ | --%  | |
| | 62 |  | $ | --%  | |
| | 63 |  | $ | --%  | |
Top gainers
| Coins | Price | 24h | |||
|---|---|---|---|---|---|
| |  | $ | +22.93%  | ||
| |  | $ | +5.57%  | ||
| |  | $ | +5.16%  | ||
| |  | $ | +4.84%  | ||
| |  | $ | +2.82%  | ||
| All gainers | |||||
What is layer-2 token?
The Blockchain Trilemma discusses that the three desirable aspects of a blockchain should be decentralized, scalable, and secure. With Layer-1 blockchain, scalability often faces compromises.
For instance, Ethereum, being a Layer-1 blockchain, has reached its maximum network capacity at 1+ million transactions a day. The Ethereum network experiences high demand, resulting in increased gas prices.
To address this, layer-2 solutions are implemented.
What is a layer-2 coin?
Layer-2 coins are native coins of Layer-2 projects or networks.
A Layer-2 network is a separate blockchain that extends the Layer-1 blockchain. This Layer-2 network aids in breaking down the processes that occur in the Layer-1 blockchain and assists in scaling.
We can envision a Layer-1 blockchain as a biscuit factory. If one person handles the process from design, production to packaging, and the factory needs to produce 100 million biscuits, completing the process might be delayed.
Layer-2 networks are analogous to separate machines that streamline the process, such as a machine for rolling the dough, cutting the biscuits into separate sizes, and another for packaging.
This enhances efficiency, preventing one person from handling all the tasks alone.
In the case of a network, Layer-1 blockchains manage aspects of decentralization, security, and data availability. Layer-2 manages scaling concerning transactions.
Additionally, Layer-2 coins aid in reducing transaction fees, increasing transactions per second, and enhancing utility by improving user experience and expanding application ranges for users.
What are the types of layer-2 solutions?
Several types of Layer-2 solutions cater to different needs. Here are a few you should know:
State Channels
A state-channel resembles a two-way communication channel for participants. In this network, miners aren't necessary to verify transactions, enhancing transactional efficiency within the network.
Examples of state channels include Bitcoin’s Lightning Network and Ethereum’s Raiden Network.
Rollups
Rollups execute transactions off the main blockchain, secured by the same layer-1 security measures.
Two kinds of rollups are:
Optimistic Rollups
These rollups run parallel to the mainnet. After each transaction, they submit the new state to the mainnet for certification, streamlining the process and reducing gas fees.
Examples of optimistic rollups include:
Zero Knowledge Rollups
These networks bundle transactions off the mainnet, creating a cryptographic proof called SNARK (succinct non-interactive argument of knowledge). This proof validates transactions. Data manipulation requires the validity proof. As the proof is approved by the rollup, transactions can be easily moved from layer 2 to layer 1, improving transaction efficiency.
Examples of zero knowledge rollups include:
Plasma
A plasma network employs a child blockchain using the mainnet as a network of trust. This assists the mainnet with transactions, aiding in its scalability.
Real-life applications of Layer-2 solutions
Bitcoin Lightning Network
The Lightning Solution for Bitcoin is one of the most renowned Layer-2 solutions. Bitcoin handles transactions poorly, managing only 7TPS compared to VISA's 24,000 TPS, requiring an upgrade.
In comes the Lightning Network!
This network processes transactions off the Bitcoin network before transferring them back to the mainnet, aiming to provide instant payments, scalability, low costs, cross-blockchain swaps, and significantly higher TPS than VISA.
The lightning network also aims to reduce transaction time from the average 10 minutes with Bitcoin to milliseconds.
Starkware
Starkware is an Ethereum scaling solution provider offering StarkNet, StarkEx, and Cairo.
StarkNet is a permissionless decentralized zero-knowledge rollup solution. Developers using StarkNet can achieve infinite scaling for dApps while benefiting from Ethereum’s security.
StarkEx is a scalability engine with customers like DeversiF, Immutable, and dYdX, enabling developers to design self-custodial dApps and robust secure scaling solutions using ZK-STARK technology.
Cairo is Starkware’s Turing language behind StarkNet and StarkEx.
Final thoughts on layer-2 coins
Layer-2 solutions are pivotal for scaling Layer-1 networks, which form the strong foundation for blockchains. Both work in tandem to provide users with the best blockchain experience.
In most cases, blockchains overcome the blockchain trilemma by incorporating both layer 1 and layer 2 solutions.
Before investing in Layer-2 coins, evaluate their use cases and how they integrate with their mainnet. Explore the Coinranking Layer-2 coins list for more information about these coins!