Layer 2

In the context of cryptocurrencyCryptocurrency is a digital or virtual currency that uses cryptography for security and operates independently of a central bank. Cryptocurrencies use decentralized technology called blockchain... More, layer-2 refers to a secondary protocol or framework built on top of a blockchainThe blockchain is a digital ledger that records transactions in a secure and decentralized manner. Think of it like a shared spreadsheet that is constantly... More network, aimed at addressing the scalability issues and reducing transaction costs. Some examples of layer-2 solutions in finance include the Lightning NetworkThe Lightning Network is a layer-2 scaling solution that allows for faster and cheaper transactions on the Bitcoin network. To use it, you would first... More, which enables fast and cheap BitcoinBitcoin is like a digital treasure that you can use to buy things online. It's like having a secret code that only you know, and... More transactions, and the Polygon Network, which provides low-cost and instant transactions for Ethereum-based assets. Another example is the DeFi lending and borrowing protocol Aave, which leverages layer-2 scaling to offer users faster and cheaper transactions.