What is the Blockchain Trilema?

In order to be successful a blockchain must have 3 characteristics:

1. Scalable

2. Secure

3. Decentralized

You can only be able to provide 2 out of these 3 as a priority while neglecting the third one.

The 2 ways of scaling are layer 2 and side chain.

For example - #Bitcoin provides - decentralization as well as security but suffers in scalability as it can take very long (upto one hour) to reach finality.

#Ripple (XRP) for instance provides a very fast average transaction time of 4 seconds. But it can be argued that it does lose out on some of the decentralization in the process.

Why do we need a layer 2 solution?

Now the base layer or layer 1 is the fundamental blockchain technology in question for example Ethereum. You can scale by offloading the work to another layer and this new layer relies on the security of the main chain.

Layer 2 refers to a secondary framework or protocol that is built on top of an existing blockchain system. The main goal of these protocols is to solve the transaction speed and scaling difficulties that are being faced by the major cryptocurrency networks.

For instance, Bitcoin and Ethereum are still not able to process thousands of transactions per second (TPS), and this is certainly detrimental to their long-term growth. There is a need for higher throughput before these networks can be effectively adopted and used on a wider scale.