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What are Layer 2 Scaling Solutions and Cross-Chain?

Centralized transfers are still the most popular channel for connecting hundreds of tokens and cryptocurrencies. However, because they are centralized, they require that you provide your private key, generating security problems since your assets are stored in your wallet.

To alleviate such problems, structuring decentralized solutions between chains and decentralized transfers will be the determining factor for the global adoption of blockchain technology.

Layer 2 solutions are simply scaling solutions built on top of the underlying blockchain to reduce congestion, transaction fees and gas costs while increasing throughput.

To solve these problems, developers across the blockchain universe have begun to create cross-chain interoperability solutions, which allow the transfer of tokens between different blockchains, expanding innovations and ushering in the DeFi (Decentralized Finance) revolution in 2018.

In addition to addressing market fragmentation and lack of compounding, cross-chain solutions have driven blockchains and DeFi to global adoption, minimizing fees, and processing transactions faster.

Cross-chain and Layer 2 solutions are primarily designed to improve the scalability of Layer 1 and reduce transaction costs. This is critical to enabling mass adoption as well as improving innovations and developments in this industry.

Scalability and fast transactions are just part of the solution. Despite the measures taken by blockchains, no large company would choose this technology to process their payments. While production and transaction speeds can compete with global card companies like Visa and MasterCard, the lack of interoperability is a major problem across the industry.

If the Internet was not interoperable and did not make it possible to transfer data through APIs, it would not have reached its current proportions.

Blockchains must introduce “cross-chain” mechanisms to ensure that the industry is global and easy to use for all users in order to increase its attractiveness and usefulness. Blockchains should be able to transfer values and data between different platforms and ensure that these connections work seamlessly across industries.

Research | Marcus Ferreira
Translation and Review | Carolina Martins
Source |

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