Overview of Bitcoin L2 Technology

Bitcoin Layer 2 (L2) technologies are secondary frameworks built atop the primary Bitcoin blockchain (Layer 1) to enhance its scalability, reduce transaction fees, and introduce new functionalities without altering the core attributes of security and decentralization that Bitcoin offers. These L2 solutions are crucial for Bitcoin's evolution, as they address the inherent limitations of the blockchain, particularly its scalability challenges, by processing transactions off-chain before finalizing them on the main blockchain. This approach significantly increases transaction throughput and reduces costs, making Bitcoin more practical for everyday transactions and microtransactions, which were previously hindered by high fees and slow processing times during peak network usage​​.

One of the primary reasons for the emergence of Bitcoin L2 solutions is the blockchain trilemma, which posits that a blockchain system can optimize only two out of three key attributes: security, decentralization, and scalability. Bitcoin, prioritizing security and decentralization, compromises on scalability. L2 technologies aim to resolve this by improving transaction capacity and speed without sacrificing the network's foundational principles​.