What’s the difference between layer 1 and layer 2 solutions?
Layer 1, which is the main blockchain ledger, operates on the underlying consensus protocol. This layer includes protocol parameters that control capabilities such as scalability and throughput. Layer 2 is an additional, off-chain protocol that works on top of the layer 1 blockchain. Parties can securely transfer funds from the blockchain into an off-chain protocol, settle transactions in this protocol independently of the underlying chain, and safely transfer funds back to the underlying chain as needed. Layer 2 protocols improve overall throughput and scalability because they reduce network congestion.