Hey guys,

so in my last post some people had trouble understanding what Cardano’s second layer solution hydra really is. That’s understandable since even just the first layer, the main blockchain, is already quite confusing to understand. Because we have a lot of experience, explaining blockchain tech to our customers, let me help you out understanding this new uprising topic. 

Let’s break it down into 2 examples to understand why we need a second layer solution and what effect it can play out. 

1. Example: The Bitcoin Lightning Network

So in my first example we have a coffee shop that starts in the morning and later in the evening closes. Instead of writing now every single coffee on the Blockchain you collect all transaction together and at the end of the day write them into a single transaction on the Blockchain. 

That’s how the Bitcoin Lighting Network works and what it does is, it combines many small transaction into 1 big transaction that gets written on the layer 1 blockchain. That makes the network way more effective and micro transaction possible. 

2. Example: Ethereum Raiden Network

In my first example I showed how a second layer solution combines transactions. In this example I show how a second layer solution even prevents transactions. 

Let’s say we want to play a game of chess on the Ethereum blockchain to secure our game. That would be quite expensive because we need to write each and every step in a transaction to the blockchain, that uses a lot of space. Instead, we could just write the end result to the blockchain but safe every game step on the layer 2. If one person says that he has won but I say otherwise, we replay the game to the blockchain (layer 1) (we have saved all steps on the layer 2) and the liar/loser has to pay the fee, that is quite high because it requires a lot of computation for the blockchain to replay each step. 

So what happens is that even if we don’t play the game on the blockchain directly and just put the end results there, in most cases nobody will lie, because in the end the blockchain reveals the truth anyways. You can prevent a lot of transactions by this layer 2 solution and enable to play games on a blockchain that would on a layer 1 not be possible.  

These are just some good visualization to understand what a layer 2 solution could be used for and why we need it. I hope i could help some of you guys understand this new rising technology better, as we see it in many many coins using it to solve the scaling problem. 

Disclaimer: Crypto Mastermind is an open Blockchain Investment Fund that is pooling knowledge and is your easy entry point into the crypto market!