The Layer 2 Blockchain Tech Is Even Bigger
Currently, blockchain development seems to be entering a new phase. The Lightning Network and various other programming solutions are operating beside the existing blockchains to assure interoperability, functionality, and scalability. However, there is still much work to be done on the technology, the security and trust solutions.
According to the director of MIT Media Lab's Digital Currency Initiative, Layer 2 is about computation being moved off-chain, either to save computing resources or to enable privacy. Instead of having scripts for specific programs that are executed by computers in the blockchain network, it is better to implement numerous computers that are involved in the transaction.
The 1989 implementation of Tim Berners-Lee's Hypertext Transfer Protocol (HTTP) over the base-layer internet protocols and Transmission Control made way for Marc Andreessen's Mosaic Netscape browser in 1994. This gave birth to numerous web-based applications, therefore, fostering online services.
In some regards, the sequencing will be distinct for the blockchain industry. Hopefully, the billions raised in the development of Layer 2 will accelerate a much broader adoption. Moreover, while HTTP was adopted universally, Layer 2 solutions are in for competition.
Designed initially for bitcoin transactions, Lightning's payment channels support interoperability has a particular smart contract capacity.
More than 2,000 nodes are already on the Lightning Network, which is managing over 7,000 channels. Though it still miles away from being a ubiquitous global network, the fact that it is growing provides a foundation for experimentation.
The Next Frontier
Lightning's payment channels offer a string of benefits such as the low fees and fast-paced payments, shortcomings that Bitcoin could never overcome. This innovation if well implemented could deprive financial institutions of revenue to a significant extent.