Do you want to learn about layer 2 blockchains? Or see a toplist of the best ones?
A layer 2 blockchain is created on top of current networks as an additional framework or protocol. The main purpose of second layer blockchains is to increase the transaction speed and scaling issues that some of the major players face. Below is a toplist of the best layer 2 networks, followed by an FAQ, additional facts, and some of the latest news if you scroll down.
Best 6 Layer 2 Blockchains
This is the toplist with the layer 2 blockchains, especially relevant in United States. There may still be restrictions what people in the your country are allowed to do when it comes to blockchains and cryptocurrencies. So make sure that you read up on the regulatory restrictions before investing. Crypto is extremely volatile and not suitable for everyone to invest in. Never speculate with money that you cannot afford to loose.
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- 1 Best 6 Layer 2 Blockchains
- 2 Introduction to Layer 2 Blockchains
- 3 What are the major layer 2 networks out there?
- 4 The 10 Best layer 2 crypto coins and tokens
Introduction to Layer 2 Blockchains
A blockchain that exists on top of an existent blockchain is known as a layer 2 blockchain. As a separate blockchain on its own, it has its own working protocols and features. It mainly extends the underlying network, while inheriting its core capabilities and components. Many of these blockchains have become somewhat household names and have corresponding coins and tokens that you can buy to support the network. In some cases, holding these coins is a crucial part to making the blockchain work as promised. This is known as the ‘proof of stake‘ consensus mechanism and is the method used by some of the biggest networks out there.
What is the difference between layer 1 and layer 2 blockchains?
A layer 1 blockchain is any network like Bitcoin or Ethereum with its own infrastructure and abilities. But a layer 2 blockchain is a child of this base network. While the latter exists as a standalone blockchain of its own, it depends on its parent network for security features and other requirements. There is some dispute within the community as to whether layer 0 blockchains should be considered the actual foundational architecture.
What is the difference between layer blockchains and Zero Knowledge (ZK) rollups?
A ZK rollup is just like a layer 2 blockchain, with one main difference. While a layer 2 blockchain optimizes the function of the underlying blockchain as a whole, a ZK rollup is mainly concerned with the speed of transactions. Put simply, a ZK rollup is a specialized category of layer 2 blockchains.
What are the major layer 2 networks out there?
Many layer 2 networks have emerged in recent times to scale the output of leading blockchains. Below you can find the best layer 2 blockchains to read up on in order to help you make smart decisions on crypto currencies.
Lightning Network is the layer 2 analogue of the Bitcoin network. The network continues to improve transaction speeds for its parent blockchain radically. At its core, it increases the throughput of Bitcoin by several orders of magnitude, making the network extremely scalable. Indeed, Bitcoin itself can process only a handful of transactions in a given second. The layer 2 network increases that by millions, or even billions of times. The network also brings down costs and is extremely secure and smart contract compatible.
What Lightning Network does for Bitcoin, the Polygon Blockchain does for Ethereum. With the introduction of the layer 2 network, Ethereum improved in both speed and affordability. The original design of Polygon aimed at enhancing Ethereum without needing to become a primary solution itself. However, developers can continue to take advantage of the ecosystem to build decentralized apps (dApps) and their own blockchains.
Similar to Polygon, the Arbitrum Blockchain extends the capabilities of Ethereum. But unlike Polygon, it is mainly concerned with decentralized apps. While it does depend on the layer 1 blockchain for security features, it primarily acts as a scalability solution for the dApps that run on the main blockchain. Indeed, the optimistic rollup enjoys billions of dollars in value with its decentralized finance (or DeFi) protocols. This makes it the biggest layer 2 network on top of Ethereum.
Loopring is the original zk rollup type of layer 2 blockchain for Ethereum. It vastly increases the speed and yield of its parent network. Indeed, it can process thousands of off-chain requests. It also brings down the fees by a factor of 100, compared to Ethereum. Such an increase in productivity makes Loopring ideal for many applications. For instance, it can power crypto trades from different sources, including both decentralized and centralized exchanges.
Dogechain mainly serves to integrate the original meme coin of the same name. With a Proof of Stake (PoS) model, it improves scalability without a compromise in the security features for the community members. Users can gain a hold of games, DeFi apps, and NFTs with the help of the layer 2 blockchain. Besides serving the holders of the original Dogecoin, it introduces its own native crypto. Known as the Dogecoin token, members can use it to govern the network itself.
The Gnosis chain is really a side chain for Ethereum that serves niche applications. It utilizes multiple layers and tokens to render its services. The network improves the performance and costs of Ethereum. At the same time, it also enacts the PoS protocol. The blockchain finds use in predictions and forecasts, while enabling both dApps and smart contracts. It is especially useful for the needs of large-scale institutional investors partaking in the crypto market.
The 10 Best layer 2 crypto coins and tokens
Many layer 2 blockchains come with their own native coins. As of now, the top 10 layer 2 coins by market cap comprise the following.
- MATIC (Polygon)
- GMX (GMX)
- LRC (Loopring)
- IMX (Immutable X)
- SNX (Synthetix)
- ZRX (0x)
- OMG (OMG Network
- INJ (Injective Protocol)
- DYDX (dYdX)
- SKL (SKALE)
Let us now briefly explore some of the coins above.
MATIC: This is the coin of the Polygon network. It is extremely valuable at this point, with billions of it in circulation. Indeed, it has outranked most of the leading cryptos in a one-year span, including Bitcoin and Ethereum. Further, it comes with high liquidity given its market cap.
GMX: It is a more stable from the GMX network, with moderate liquidity. It has outdone an astounding 98% of the best crypto assets in a single year. There’s only a few million of it in circulation, though.
LRC: As the native coin of Loopring, LRC has been highly unstable yet liquid. Most of the leading cryptocurrencies have outperformed it in the last year. But it enjoys an impressive annual inflation rate of just 0.14%, which is one of the best in the market.
Comparison of blockchains
You can compare different blockchains using their market cap, the technology used, transaction speeds, the security features, and others. See a top list of the best blockchains above, and continue to read their reviews in order to learn more.
Who creates layer 2 blockchains?
These networks arise from the need to scale existing blockchains. Mainly, it is the developers in the original participating network who build these blockchains. Due to the nature of the original public ledgers, anyone with the right skills and training can take part and innovate.
What are the uses of layer 2 blockchains?
These networks mainly find uses in improving their parent blockchains on which they exist. But as standalone blockchains, they can power various services, including dApps, NFTs, and DeFi, as well as their own cryptos. Please read on the individual blockchains in the toplist above to learn more about their uses.
Can I invest in layer 2 blockchains?
Yes, you can. Many layer 2 networks readily offer their own coins. Some of these coins are extremely valuable and keep growing in value. But note that owing to their nature, they can be highly volatile and risky as well. You can find a list of the current leading coins in the toplist above.