A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin & Ethereum, for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
The blockchain is the means in which transactions, records and information is transmitted, stored, and exchanged publicly, securely, and could even be done so in a decentralized means.
It was determined many years ago by Satoshi Nakamoto that the blockchain would be used as database and immutable ledger that Bitcoin would use to record and verify transactions in a permanent way. Bitcoin revolutionized finance and introduced cryptocurrency to the world.
On that same track of thinking, other blockchains were developed, and many for different purposes and functions, all with one thing in common= permanent, verifiable, safe, transactions between 2 parties without a middleman, a company, government, or person that could stop the transaction on the blockchain. In comes Ethereum, a smart contract platform that is constructed in a way that allows programmable contracts, to run and perform tasks on the blockchain, utilizing the same benefits and security that Bitcoin was using to secure transactions of payments through the Bitcoin.
At this current point of development, Ethereum, is congested, slow (compared to newer blockchains), and developed on the proof of work technology which is the main cause of its issues. Ethereum is a beautiful machine that is long overdue for an upgrade. Enter layer 2 solutions.
As mentioned before, Ethereum operates as a smart contract platform that allows smart contracts to run and execute transactions on its system, including extensions of the blockchain itself to form Layer 2 solutions or Layer 2 blockchains.
Layer 2 blockchains, as mentioned before are extensions of Ethereum’s layer 1 blockchain that offer scaling solutions to cut down on transaction fees, and congestion. The benefits of using a layer 2 is being able to utilize the security, data availability, and decentralization of Ethereum’s Layer 1.