DeFi 101Sep 13

What are Layer-Two networks in DeFi?

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Layer-Two Networks

Summary

  • Layer-two networks are protocols build on layer-1 blockchains
  • Layer-two networks boost scalability and transactions speeds
  • Ethereum is the most common layer-1 blockchain for layer-two networks

Layer-two networks in decentralized finance are protocols build on layer-1 blockchains like Ethereum. They are built to improve scalability and increase the speed of transactions while taking advantage of the security features of the main layer-1 blockchain.

In some cases, layer-two networks can process thousands of user transactions per second, which is not always possible on layer-1 blockchains.

Ethereum is the most popular blockchain for layer-two networks that include channels, plasma, and sidechains.

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