In the last article we talked about the incoming Ethereum upgrade but it is a long-term vision that the Ethereum community is working towards but we need something which can solve the scalability problem of Ethereum now and help developers to build decentralized applications on Ethereum virtual machine.

For understanding Ethereum layer 2 simply

Let’s think of a building in which some families are living already but we want to house some more families and decongest the building also. How can we do that?

We can do that by building additional floors on top of the building . Ethereum layer 2 scaling solutions are the same as building on top of the existing foundation of Ethereum layer 1 . By doing this we get the benefits of Ethereum's security and decentralization and we also scale Ethereum successfully.

By this analogy, layer 2 solutions are like building additional floors on top of existing foundations whereas Ethereum upgrade is like solidifying and broadening the foundation itself.

Now that we have understood Ethereum layer 2 ,

Let’s deep dive into what the solutions are

But before going deep into them, we need to understand some important terms which are going to be repeated over and over again in our further study

Off-chain transactions

Off-chain transactions are transactions that occur when two parties exchange digital tokens outside of the blockchain. Since off-chain transactions do not require miners or consensus from a network of nodes, they are much faster and cheaper than their on-chain counterparts. However, there are tradeoffs.

• Off-chain transactions cannot be verified by the entire community: only the two parties involved know about them. This lack of transparency means that these transactions can be forged and manipulated without anyone knowing—so you have to trust that your counterparty will record and update your transaction correctly.
• Off-chain transactions are fast. In general, they happen in seconds and cost fractions of a cent (compared to on-chain transactions which can take minutes and cost several dollars).
• Off-chain transactions aren't free because there's still some overhead with them (eg., managing the funds).

There are many Ethereum layer 2 scaling solutions available each having its sets of pros and cons and their goodness depends on what our use case is

The various layer 2 solutions are:

1. State channels

2. Rollups

3. Sidechains

4. Plasma chains

5. Validiums

Let’s understand them one by one in the upcoming parts

So, are you ready to go on a learning quest, 

Let’s go →