What is the difference between Layer 2 and Layer 3 solutions in the context of cryptocurrencies?

1 answers

• Nov 28, 2021 · 3 years ago
  Layer 2 and Layer 3 solutions are two different ways to address the scalability issues of cryptocurrencies. Layer 2 solutions, such as the Lightning Network, add an additional layer on top of the blockchain to enable faster and cheaper transactions. They achieve this by creating payment channels between users, allowing them to conduct multiple transactions off-chain before settling them on the main blockchain. Layer 3 solutions, on the other hand, take a more radical approach by creating separate channels outside of the blockchain. These channels enable instant and low-cost transactions, but they require a higher level of trust between participants. While Layer 2 solutions are more widely adopted at the moment, Layer 3 solutions have the potential to revolutionize the scalability of cryptocurrencies in the future.
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