Bitcoin’s Second Layer Scalable Solutions

July 3, 2020      Vandana Malik

Bitcoin is that popular cryptocurrency which has changed the lives of millions of people across the world. Though Bitcoin has gained huge success and world-wide adoption, people must not have imagined this thing during the time when it was introduced. Back in 2009 when it was launched by Satoshi Nakamoto, most of the people were quite sceptical about it while a very few of them were confident about the success.

While creating Bitcoin, the main aim was to build up a system where there will not be any kind of third party intervention. Along with this, it was meant for really fast transactions and highly cost-effective at the same time. However, with the increase in popularity and adoption of the network, it seems that this motive of fast and cost-effective transactions seems to be lacking behind. People have a lot of queries regarding the transactions speed and price of Bitcoin. This is called the Bitcoin scalability problem when the network is able to perform transactions at a very limited rate. In order to solve this problem, there are second-layer solutions for Bitcoin.

Second layer solutions

The main purpose of these second layer solutions is to make the technology as much stable as it can. Through this, the scalability problem that the Bitcoin network faces, is solved. These solutions are developed on the top of the main blockchain which helps in reducing the congestion of the network and promotes faster speed.

Lightning Network

One of the most common and widely used second layer solutions is Lightning Network. This solution uses the micropayment channels which helps to reduce the scalability difficulty and ultimately increase the capability of blockchain to conduct the transactions. These micropayments are done using a complete network of various payment channels between the bitcoin users and parties. It has been seen that all the transactions which have been done using the lightning network do not take place on the Bitcoin blockchain. In order to perform its task, Lightning Network uses multi-signature scripts and along with this, it requires smart contracts to improve blockchain’s capability to increase the number of transactions.


Another option that has been used to deal with the scalability problem on the Bitcoin network is Segregated Witness (SegWIT). This platform has been launched to operate in such a way that the signatures should not be placed along with the data of transactions. Through this, it will be able to store more transactions in one block and ultimately the speed of transactions will be increased. This option has been adopted by various blockchains and cryptocurrencies but one of the prominent ones is Bitcoin. Different Bitcoin projects are relying upon it in order to improve the efficiency and the speed of the transactions.

Bitcoin Exchanges using Second Layer Scalable solution

With the introduction of these second layer scalable solutions, it has been seen that a lot of exchanges have been using them in order to avoid the scalability problem on the network. The most prominent one is the Bitcoin exchanges to use such solutions.


Bitfinex, one of the largest crypto exchange which is based in Hong Kong, has extended its hand to the Lightning Network. This step was taken to deal with the scalability problem which is generally there on the Bitcoin network. It has been seen that as soon as the exchange started using Lightning Network, the users were able to get instant transactions for their withdrawals and deposits.

River Financial

Not a prominent one but River Financial is another well known Bitcoin exchange that has been using Lightning Network in order to deal with the scalability problem. It is quite a new exchange but adding such kind of options to its platform is quite a big and smart decision which will help them to attract more users.


Gemini is one of the prominent and largest Bitcoin exchanges which has added its support for SegWIT. It is there to improve the speed of the transactions by boosting it up and not only the speed, but it also works to reduce the transaction fees which is going to a great step towards reducing the scalability problems. Being such a big exchange, Gemini has set an example for various exchanges to deal with the blockchain scalability problems using the second layer solutions.

Limitations of Second Layer Solutions

This is an undeniable fact that second layer solutions have played quite a major role for different blockchain and cryptocurrencies. However, there are several issues and limitations also which are associated with it and some of them are –

  • Transaction fees problem – Even though, second layer solutions play quite a major role in reducing the transactions fees and increasing their speed at the same time. It is not accurate to say that these solutions will be able to solve the transactions fees problem completely. 
  • Prone to hacks and theftsThese solutions are there to increase the transaction speed and reduce the fees but for this, there is a need to remain online all the time. Particularly to receive and send the payments on the network. Due to this, the network becomes prone to various hacks and thefts.


With the increase in Bitcoin adoption and this growing network, the scalability problem is increasing with each passing day. Because of this, there is a high need to adopt second layer solutions for different crypto exchanges out there in order to provide better facility to the crypto users.

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Vandana Malik
Vandana Malik

Vandana has received Master of Arts degree in English from GEU Dehradun. She is currently working as a content writer with Agio Support Solutions and earlier worked as a sub-news editor at Business News and Information Services Private Limited. She is an enthusiastic content writer and aims to bring a compelling yet informative content to the audience. Meanwhile, enhancing her own knowledge in the cryptocurrency and blockchain industry.