Layer 2 is a term used for solutions created to help scale an application by processing transactions off of the Ethereum Mainnet (layer 1) while still maintaining the same security measures and decentralization as the mainnet . Layer 2 solutions increase throughput (transaction speed) and reduce gas fees.
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Two major examples of layer 2 solutions are the Bitcoin Lightning Network and the Ethereum Plasma . Despite having their own working mechanisms and particularities, both solutions are striving to provide increased throughput to blockchain systems.
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