Efficiently scaling Ethereum and Bitcoin has been a pressing issue for years. Layer 2 bridges offer a solution, allowing users to process transactions faster than before. But is it easy for the average user to adapt to Layer 2, and is it worth the effort?
Experienced traders know that cryptocurrency transactions can often take minutes at a time to complete. Layer 2 bridges speed up crypto transactions by relieving the stress on the blockchain and taking on some of its tasks. Think of Layer 2 bridges as scaling solutions for blockchains, assisting built to improve efficiencies, and you’ll have a basic idea of what they do.
As Aus Merchant continues to explore emerging crypto technology to help our clients invest digital assets, we’ve written this guide to help you take advantage of Layer 2 protocols to streamline your crypto trading. These bridges help traders of all levels get the most for their money with faster transactions and lower costs. Read on to learn how Layer 2 works and how to pick the best bridge for you.
As more people join the cryptocurrency trading world, the blockchain grows in size and complexity. Because every crypto transaction must record each transaction in this ledger, the time it takes to complete a transaction can increase due to increasing congestion.. The same slow transaction speed (currently around eight minutes) applies to traders who switch trading platforms or convert one coin to another.
Layer 2 bridges can speed up crypto transactions by performing some record-keeping on behalf of the blockchain (referred as the protocol layer, or Layer 1). Layer 2 records numerous transactions in groups that Layer 1 would typically register individually. A channel opens between layers when the main ledger refers to these transactions for any reason.
Because third parties make Layer 2 bridges, each operates differently to achieve the same goals. They vary in fees and how they validate transactions. Choosing a bridge that’s right for you depends on what you’re comfortable with.
For example, one type of Layer 2 chain, Optimistic Rollups, grants seven days to dispute transactions for added security. Zero-Knowledge Rollups instead hold funds in a smart contract until they are validated. Other methods exist, but they all focus on validating the work completed between both Layers.
Layer 2 technology has the immediate benefit of reducing cryptocurrency transactions’ costs and processing times. These benefits lend credibility to cryptocurrencies being used for high frequency transactions by making them more practical in a broader scope. Should Layer 2 be adopted in large numbers, shoppers may soon pay for their groceries with Bitcoin and stablecoins more readily.
How to Bridge to Layer 2
Before you can use Layer 2 and reap its many benefits, you need to choose which third-party service is right for you. Unfortunately, performing the necessary research means sifting through technical information, a task that can overwhelm even the most enthusiastic traders. However, the advice of experienced crypto brokers like Aus Merchant can help you understand how Layer 2 services differentiate.
While going over options with your broker, you should consider which blockchain(s) you want to connect your Ethereum wallet with, as this will determine what coins you’ll get in exchange. Again, each bridge connects to different blockchains, and many connect with more than one. Cryptocurrency brokers can help you research other coins if you are unsure.
Each service will have its own steps for integration and bridging assets, but they will all include methods for connecting to your Ethereum wallet. Be sure to follow the service’s guides for keeping your account information secure and protected. Once completed, you’ll have access to their Layer 2 portal and can make exchanges.
Current Layer 2/1 Bridges
The number of Ethereum Layer 2 bridges is rapidly growing as the technology proves how useful it is to scale the blockchain, similarly there are more Layer 1 blockchains also adopting bridging technology to attract higher asset value locks, compostability and adoption. We’ve tried to include a wide collection of bridges to illustrate how many options you have, but the list is by no means complete. You can stay up-to-date with Layer 2 and other Bitcoin news by talking with our brokers.
Ethereum Layer 2 Bridges include:
For Bitcoin transactions Layer 2, Lightning Network is still the standard.
Explore Layer 2 with Aus Merchant
Being an effective crypto trader and investor requires you to stay informed on all of the latest developments in blockchain technology, including Layer 2. It can be a lot to take on from monitoring Bitcoin prices, researching cryptocurrency exchanges and trading platforms, and crypto legislation, on your own.
That’s why Aus Merchant is here.
We’re leading the charge to bring institutional finance into Australia’s growing digital asset space. We provide clients with access to multipleLayer 2 payment gateways, which offers reduced gas fees, yield opportunities, and faster settlements. So whether you need help navigating Layer 2 or other aspects of crypto investing and trading, contact a broker today to discover the difference our expertise can make.