The Most Prominent Layer-2 Solutions in 2024: The Complete Guide

In recent years, blockchain technology has experienced explosive growth, from Bitcoin’s launch in 2008 to the diverse applications of DeFi, GameFi, NFTs, and Web3 today. However, the biggest challenge that layer2 networks need to address is scalability. Basic layer-1 blockchains like Ethereum and Bitcoin, while secure and decentralized, face significant limitations in transaction throughput, creating a need for more efficient layer2 solutions.

Why Layer-2 Becomes the Core Solution

To understand better, let’s compare: Bitcoin processes about 7 transactions per second (TPS), Ethereum Layer-1 only reaches 15 TPS, while traditional systems like Visa can handle 1,700 TPS. This gap is not a small issue—it’s a barrier preventing widespread blockchain adoption.

Layer2 protocols emerge as a golden solution, addressing the “impossible triangle” of blockchain: scalability, security, and decentralization. Instead of processing all transactions on the main chain (Layer-1), layer2 networks redirect transactions off-chain, then aggregate them on the main blockchain, significantly reducing congestion, lowering fees, and increasing throughput.

Imagine a highway: Layer-1 is the main road, but it’s overloaded; layer2 is additional lanes built to allow traffic to flow at lightning speed with nearly zero fees.

How Layer-2 Protocols Work

The principle of layer2 operation is relatively simple: transactions are processed off-chain, then combined into a single transaction on the main blockchain. This process greatly reduces load on Layer-1, saving time and costs.

Different layer2 protocols use various methods to verify:

Optimistic Rollups: Assume all transactions are valid until proven otherwise. This approach simplifies verification and reduces computational costs.

Zero-Knowledge Rollups (zk Rollups): Bundle transactions into a single proof without revealing personal details. This type prioritizes privacy.

Validium: Combines off-chain transactions with cryptographic proof verification, balancing efficiency and security.

Plasma Chains: Act as specialized sidechains, each with its own infrastructure to handle specific tasks.

Key Benefits of Layer-2

Unlocking DeFi Potential: Layer2 protocols make decentralized applications cheaper, faster, and smoother, opening up countless possibilities for yield farming, trading, and other DeFi activities.

Increasing Trader Profits: Significantly lower transaction fees, especially on DeFi platforms or trading, directly boost net gains.

Driving Mainstream Adoption: By making blockchain more accessible and user-friendly, layer2 acts as a catalyst for expansion into various industries beyond finance.

Comparing Layer-1, Layer-2, and Layer-3

To better visualize blockchain architecture:

Layer-1: The core foundation (Bitcoin, Ethereum), where security, consensus mechanisms, and smart contracts occur. Challenge: as traffic increases, it becomes congested, with high fees and slow speeds.

Layer-2: Scalability solutions built on top of Layer-1, redirecting transactions to auxiliary networks for processing. Benefits: faster transactions, lower fees, higher throughput.

Layer-3: Specialized solutions built on layer2, optimized for complex dApps requiring advanced off-chain computation or cross-chain communication.

The right choice depends on your needs: Layer-1 for a solid base, layer2 for speed and cost efficiency, layer-3 for specialized applications.

Top 10 Layer-2 Projects in 2024

1. Arbitrum – Market Leader

Throughput: 2,000-4,000 TPS
TVL: $10.7 billion
Market Cap: $2.37 billion+
Technology: Optimistic Rollup

Arbitrum uses Optimistic Rollups, processing transactions up to 10 times faster than Ethereum and reducing gas costs by 95%. As of 2024, Arbitrum holds over 51% of the TVL share among Ethereum layer2 networks. Its ecosystem is rich with DeFi protocols, NFT marketplaces, and gaming projects. The ARB token is used for transaction fees, staking, and governance. With a strong development team and active community, Arbitrum continues to lead in the layer2 race.

2. Optimism – Main Competitor

Throughput: 2,000 TPS
TVL: $5.5 billion
Market Cap: $3 billion+
Technology: Optimistic Rollup

Optimism offers up to 4,000 TPS, processing transactions 26 times faster than Ethereum with 90% lower gas fees. It aims to be a community-governed platform with many DeFi protocols, NFT marketplaces, and DAOs. The OP token is used for fees, staking, and governance. Although dependent on Ethereum, Optimism continuously develops its technology and ecosystem.

3. Lightning Network – Bitcoin Layer-2 Solution

Throughput: Up to 1 million TPS
TVL: Over $198 million
Technology: Bi-directional payment channels

Lightning Network enables instant off-chain Bitcoin transactions at low cost, leveraging Bitcoin’s security. It provides near-instant confirmation, ideal for daily payments. However, technical complexity and limited adoption remain challenges.

4. Polygon – Multi-Technology Ecosystem

Throughput: 65,000 TPS
TVL: $4 billion
Market Cap: $7.5 billion+
Technology: zk Rollup and others

Polygon is a multi-chain ecosystem offering various layer2 solutions for Ethereum. With 65,000 TPS, it significantly outperforms Ethereum. Leading DeFi protocols like Aave, SushiSwap, and Curve are integrated on Polygon. The MATIC token is used for gas fees, staking, and governance. Polygon holds the highest DeFi TVL among layer2 networks.

5. Base – Coinbase’s Layer-2

Throughput: 2,000 TPS
TVL: $729 million
Technology: Optimistic Rollup

Base aims to enhance Ethereum’s capabilities. Using OP Stack, it targets 2,000 TPS and reduces Ethereum gas fees by up to 95%. It’s developer-friendly, offering familiar tools. Backed by Coinbase, it benefits from security and user base. Still in development, Base is building a crucial bridge for Ethereum’s future scalability.

6. Dymension – Modular Ecosystem

Throughput: 20,000 TPS
TVL: 10.42 million DYM
Technology: RollApps

Dymension is the first layer2 network within Cosmos with a modular architecture. It separates functions like consensus, execution, and data availability, allowing each RollApp to optimize performance. DYM tokens are used for gas, governance, and staking. Still in development, its modular design offers flexibility and scalability.

7. Coti – From Cardano to Ethereum

Throughput: 100,000 TPS
TVL: $28.98 million
Market Cap: $72.1 million
Technology: zk Rollup

Initially a layer2 solution for Cardano, Coti is transitioning into a privacy-focused layer2 for Ethereum. COTI tokens are used for fees, staking, and governance. This shift aims to provide fast, low-cost, secure transactions with privacy features.

8. Manta Network – Privacy Hub

Throughput: 4,000 TPS
TVL: $951 million
Market Cap: $565 million
Technology: zk Rollup

Manta Network focuses on privacy for Ethereum, enabling anonymous transactions. It includes Manta Pacific (EVM-compatible layer2) and Manta Atlantic (privacy identity management). Zero-knowledge cryptography ensures transaction validity without revealing private data. Manta quickly became Ethereum’s third-largest layer2 by TVL in 2024.

9. Starknet – Advanced STARK Technology

Throughput: 2,000-4,000 TPS
TVL: $164 million
Technology: zk Rollup with STARK proofs

Starknet uses STARK proofs for off-chain transaction validation, offering theoretical throughput in the millions TPS. It significantly reduces transaction fees, making blockchain transactions nearly free. It provides a developer-friendly environment with Cairo language. However, its cryptographic complexity and smaller user base compared to older layer2s are challenges.

10. Immutable X – Gaming-Focused

Throughput: 9,000 TPS+
TVL: $169 million
Market Cap: $2.51 billion+
Technology: Validium

Immutable X is a layer2 designed for gaming, offering scalability, low costs, and security. It achieves over 4,000 TPS with near-instant transactions and minimal fees. IMX tokens power the network. Immutable X promises a seamless experience for gamers with true NFT ownership and cross-game interoperability.

Impact of Ethereum 2.0 on the Future of Layer-2

Ethereum 2.0, a major upgrade, is laying the groundwork for significant advancements in blockchain technology. The integration of Danksharding, especially Proto-Danksharding, is expected to boost Ethereum’s throughput to 100,000 TPS—a quantum leap.

This progress has major implications for layer2 networks:

Driving Scalability: Danksharding optimizes layer2 efficiency, turning them into cost-effective, high-capacity solutions capable of handling all traffic without excessive costs.

Lower Transaction Fees: Proto-Danksharding can significantly reduce layer2 transaction costs, opening opportunities for both DeFi veterans and newcomers.

Seamless Integration: Proto-Danksharding will enhance Ethereum’s support for rollup layer2s, enabling smoother interoperability and tighter communication.

Enhanced User Experience: Faster confirmations, less congestion, ultra-low gas fees—these are the potentials of combining Ethereum 2.0 with layer2.

Ethereum 2.0 doesn’t render layer2 obsolete; instead, it creates a symbiotic relationship where Layer-1 and layer2 collaborate to deliver a more efficient and scalable blockchain ecosystem.

Conclusion

Layer2 protocols have become foundational in improving the blockchain ecosystem. By addressing Layer-1’s limitations, layer2 networks mark a transitional phase in blockchain technology development. In 2024, layer2 is not just a trend but a transformative force.

From booming Ethereum layer2 projects to innovative Bitcoin solutions, these networks are shaping the future of crypto. They pave the way for widespread adoption, unlock new opportunities, and demonstrate that blockchain can be fast, affordable, and accessible to all. Layer-2 is not just technology—it’s the key to the future of decentralized finance.