Modern Problems Call for Layer 2 Solutions

You’re already familiar with Layer 1 technology, even if you’re unfamiliar with the term. Layer 1 is the base blockchain technology that runs all cryptos. Now, Juan Villaverde, editor of Weiss Crypto Portfolio, wants you to get in on Layer 2 solutions.

Layer 2 is a parallel secondary framework or protocol built on top of an existing blockchain system to provide updates or solutions.

Here’s how he describes it:

You cannot just upgrade the base layer of the blockchain. So, it's better not to go there. It's better to just say, "Okay, let's just build this thing in parallel. Let's connect it to Layer 1 without changing anything there.”

[Layer 2 is] a different way of doing a bunch of transactions, pushing them elsewhere — off-chain, we call it. Then, we write a summary of these transactions using cryptography, obviously, on the main blockchain.

The reason we need this is because classic blockchains are extremely expensive, and they're getting more expensive as more people are using them. So how do we fix this? Typically, what you do is you keep everything as is on Layer 1 — that will be the blockchain — and we start experimenting with cool, different solutions on Layer 2.

And there’s nothing stopping progress at just Layer 2. According to Juan, as needs develop across the crypto market, solutions can well pop up in Layer 3, Layer 4 and beyond.

In this informative 35-minute video, Juan focuses on the Queen of Altcoins, Ethereum (ETH, Tech/Adoption Grade “A-”). ETH has been on the rise in 2021 as the decentralized finance (DeFi) revolution picks up steam. The downside is that processing times and fees have risen in step.

There are several Layer 2 solutions currently available and in development for ETH to tackle this problem. In his interview, Juan explains a few of them … and how investors can profit off them without investing in the Layer 1 blockchain.

Layer 2 solutions are the cutting edge of crypto. I suggest you watch the video to learn more.

Best wishes,

Beth Canova

Assoc. Managing Editor

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