One of the biggest hopes for the future of the cryptocurrency sector is the introduction of Ethereum 2.0. Its promise, made many years ago, is to work hard to increase the network efficiency of the most popular altcoin on the market, which will have an impact on transaction fees and processing times.

Despite switching to the proof-of-stake (PoS) consensus process, the scalability of the Ethereum (ETH) network has not yet significantly improved. As a result, Layer 2 initiatives like Polygon (MATIC), which compete with altcoins, continue to garner a lot of interest.

Due to their perception that competing networks are less safe than the most popular smart contract platform, many investors ultimately decide against using them. This may be found in a well-known blockchain called Solana (SOL), which has, as of this writing, experienced eight network failures since its introduction in 2020. Investors who have been following the cryptocurrency market for some time have already noticed this. Consequently, a Layer 2 might be the best choice to avoid this hassle and save money.

What's Layer 2?

A secondary protocol called Layer 2 is created from an existing blockchain system.

The main objective of Layer 2 is to address the issue of transaction speed and how a blockchain scales its capacity to handle numerous transfers at once. By hitting this goal, Layer 2 can also reduce transaction costs.

Layer 2 can be of four different types. The most popular one is the sidechain model, which offers scalability and is recognized for consistently performing the same function, regardless of Layer 1.

Plasma chains make up Layer 2's second subtype. This method uses a custom consensus algorithm to create transaction blocks.

Although it refers the blocks to Layer 1, the third form of Layer 2, rollup, has a lengthy validation period for transactions of up to seven days.

State channel is the final type on the Layer 2 list. Compared to other types of network dimensioning, it has more complicated processes. It opens a channel when the token is put on the Ethereum blockchain, and the entire operation happens through tickets that are signed at Layers 2 and 1 before Layer 2.

When it comes to Layer 2, Polygon is the most prominent project. Up to 65,000 transactions per second are promised to be completed at exceptionally low costs. In contrast, the ETH blockchain is able to provide 15 to 20 transfers on average throughout that time.

However, as Ethereum 2.0 continues to develop, its cofounder Vitalik Buterin predicts that the leading altcoin will be able to execute up to 100,000 transactions per second. Additionally, a decreased transfer rate is anticipated for these transactions.

Are Projects Using Layer 2 Risky?

In truth, Layer 2s simply aim to make the ETH blockchain more scalable, and they risk losing market share if the altcoin completely switches to Ethereum 2.0. After all, using a solution when the primary network is sufficient already is pointless. In that regard, initiatives who do not consider reinventing themselves right away might anticipate having a spot reserved for them in the crypto graveyard.

Since Polygon did not become the top Layer 2 by accident, this should not be the case. New advances are being made on the MATIC network, and significant agreements have been formed with the scalability solution.

The Polygon ID functionality, targeted at businesses, aims to offer data privacy to credit histories, for example, and a decentralized organization, carried out through Polygon. This functionality may have an impact on the institutional use of Layer 2.

In addition, Polygon is working on three new features that indicate it may expand even further, independent of the release of Ethereum 2.0. Let's look at them quietly:

A blockchain with a focus on routine use and data scalability is called Polygon Avail. Off-chain scaling solutions will be brought by it when it arrives.

Support for arbitrary smart contracts is offered by Polygon Miden.

In addition to supporting Plonky2, Polygon Zero will be one of the market's quickest scaling options.

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