<p><strong>Layer 2</strong> refers to a secondary framework built on top of an existing <a href="/NewSite/encyclopedia/blockchain/" class="ency-link">blockchain</a>, designed to enhance its functionality, scalability, and privacy. These layers operate independently, communicating with the main blockchain through a two-way peg mechanism.</p>
<p>Layer 2 matters as it enables blockchain networks to process more transactions per second, reduce fees, and improve privacy. For instance, <a href="/NewSite/encyclopedia/ethereum/" class="ency-link">Ethereum</a>'s Layer 2 solutions like Plasma and Optimistic Rollups aim to address its scalability issues, making it more efficient for decentralized applications (dApps) and smart contracts.</p>