Layer-2 solutions build on top of Layer-1 to increase throughput and reduce costs, settling results back to the base chain.
L2s offload execution from L1 while inheriting security properties via proofs or channel mechanisms. Examples include payment channels, rollups, and sidechains with periodic checkpoints.
"Payment channels like the Lightning Network batch many transfers with final settlement on L1."
"Rollups post compressed data and validity proofs to L1, scaling throughput while preserving security."
Tradeoffs involve latency, capital lockup, operator trust assumptions, and withdrawal delays. Designs vary in how much they rely on L1 for data availability and fraud/validity proofs.
"Channels require online availability for dispute windows; rollups impose exit periods to prevent fraud."
"Sidechains provide fast execution but may rely on separate validator sets and bridges."
All terms and definitions may update as the Cryptionary improves.