Learn Concept: Shift in Ethereum Market: Rise of Layer 2 Networks

By: Eva Baxter

Understanding Layer 2 Networks and their significance involve exploring a future scenario where these networks exhibit exponential growth, thereby affecting Ethereum's market dynamics. The prediction of Ethereum's Layer 2 networks potentially reaching a staggering valuation of $1 trillion by 2030 suggests their increasing perceived value in the crypto space.

Layer 2 is a collective name referring to solutions that help increase the capabilities of the base layer blockchain, or Layer 1, by handling transactions off the main Ethereum blockchain; under certain assumptions, which would then guaranty that the network remains free from congestion, and the transaction fees are lowered.

Several Layer 2 solutions exist such as Sidechains, State Channels, Plasma, Rollups, and more. All these solutions follow a basic principle: take as much computation off-chain as possible, allowing for speedier and cheaper operations, while leaning on the base layer only as the absolute source of truth.

Nevertheless, Layer 2's potential growth also depends on several factors like the current market conditions of Ethereum itself. With Ethereum struggling around the resistance zone and potential signs of further losses, market analysts are closely observing the relationship between Ethereum and it's Layer 2 networks. You can continue exploring this concept in a detailed manner through the provided article .