Glossary

Layer 2

Secondary protocols built on top of a base blockchain to dramatically improve transaction scaling.

What is Layer 2?

Secondary protocols built on top of a base blockchain to dramatically improve transaction scaling. While Layer 2s are excellent for retail payments, Lygos Finance locks $50K-$50M loan collateral purely on Layer 1 using DLCs to guarantee maximum security for institutional capital.

Full Definition

Layer 2 solutions, such as the Lightning Network or Rollups, process transactions off the main blockchain to reduce congestion and fees. They rely on the underlying Layer 1 blockchain for ultimate security and final settlement. Layer 2s are critical for achieving global scalability for digital assets without altering the core protocol.

How Lygos Uses This

While Layer 2s are excellent for retail payments, Lygos Finance locks $50K-$50M loan collateral purely on Layer 1 using DLCs to guarantee maximum security for institutional capital.

Why this matters for borrowers

Understanding Layer 2 helps you evaluate how different platforms handle your Bitcoin. Not all custody models are equal, and the technical details determine whether your BTC is truly safe.

Related Terms

Explore further

Borrow against your Bitcoin without giving up custody

Starting at 10% APR, $0 origination fees, and DLC-secured collateral on the Bitcoin blockchain.