Layer-2 scaling is a term that seems to be mentioned everywhere in the Ethereum ecosystem at the moment. But what is Layer-2 technology, what can it do, and why does it matter?
The rapid rise of decentralised finance (DeFi) and digital art (NFTs) on Ethereum has driven up transaction costs for ordinary users meaning that simple transfers of tokens can cost upwards of 40 dollars. This has left us all wondering how Ethereum can possibly keep growing. Is mainstream adoption realistic if the majority of people are priced out of using it for even basic transfers?
Layer-2 (L2) technology is the proposed solution to allow Ethereum to scale to millions of users. L2 is considered by many, including the Ethereum Foundation and Vitalik to become the main way that Ethereum will support higher transaction throughputs in the future.
In fact, many versions of Layer-2 are already in operation on Ethereum today!