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A Summary of

The importance of layer two

by
Elizabeth Stark
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The initial appeal of the internet was the decentralization and freedom it provided users. In recent years the development of Blockchains and Layer 2 introduced new technology that is not tied to any central entity. 

The Early Years

Around the year 1995, the world wide web emerged. It was completely decentralized with little to no control over users. 

Back to Centralization

In the early 2000s, the creation of new webservers known as The Cloud and Walled Gardens emerged. - The Cloud: Space where data could be saved onto a centralized external server to increase the storage space provided to users. - Walled-Gardens: Platforms where all user data is stored in a centralized manner (i.e. Facebook and Twitter)

Re-Decentralization

Around the year 2008, the first blockchain was proposed in the financial market. The Bitcoin white paper promised a peer-to-peer electronic cash system. The was reminiscent of the mid-90s decentral internet use. However, there was pushback due to disbelief that blockchains could reach a wide scale.

Initial Scaling challenges

  • Reaching a global consensus
  • The double-spending issue
  • Large scale inefficiency

Layers: The Solution

Blockchains had the potential to serve as the base layer of decentralization on the internet. Building layers upon the initial blockchain allowed developers to minimize the data stored on the underlying blockchain while still anchoring to the blockchain in a decentralized manner.

The Layers of blockchain

  1. Blockchain/ APIs
  2. Layer 2 applications
  3. Blockstacks, Lightning Networks, Tumblebit, Statechannels, etc
  4. Data in Underlying Blockchain

Cryptographic Design of Layer 2

  • Solves the double-spend issue, and secures all transactions.
  • Transactions are logged on to the blockchain. 
  • A peer-to-peer network with no intermediary
  • The blockchain acts as an arbiter, aka a globally decentralized judge that cannot be bribed.
  • Cross-chain atomic swaps between assets
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