# Layer-2

Source URL: https://support.dxp.blockstream.com/education/glossary/layer-2
Updated: 2026-05-26T17:14:32.000Z
Letter: L

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Bitcoin scaling solutions built on top of the base layer that process transactions off-chain with lower fees and faster confirmation times, settling back to the Bitcoin mainchain for final security.

The Lightning Network uses peer-to-peer payment channels to enable instant, high-volume transactions. Two parties commit funds in an on-chain multisig, exchange unlimited off-chain payments between them, and settle the final balance on-chain when the channel closes. Each hop across the network is secured by Hash Time-Locked Contracts (HTLCs), ensuring intermediaries cannot steal funds in transit.

The Liquid Network is a federated sidechain that extends Bitcoin with Confidential Transactions, 2-minute block times, and native asset issuance. Bitcoin moves onto Liquid through a peg-in process and back through peg-out, anchored to the mainchain via the Federation's multisig.

Lightning and Liquid are complementary. Lightning excels at instant, small-value payments. Liquid excels at confidential transfers, digital securities, and financial applications requiring faster settlement. Both reduce load on the base layer while extending Bitcoin's utility.

Navigation: Blockstream Help Center > Education > Glossary > Layer-2

## Related Terms in This Letter
- [Lightning-as-a-Service (LaaS)](https://support.dxp.blockstream.com/education/glossary/lightning-as-a-service)
- [Layer-2](https://support.dxp.blockstream.com/education/glossary/layer-2) (current)
- [Lightning Specification](https://support.dxp.blockstream.com/education/glossary/lightning-specification)
- [Lightning implementation](https://support.dxp.blockstream.com/education/glossary/lightning-implementation)
- [Lightning Network (LN)](https://support.dxp.blockstream.com/education/glossary/lightning-network)
- [Liquid Network (LQ)](https://support.dxp.blockstream.com/education/glossary/liquid-network)
- [Lightning Service Provider (LSP)](https://support.dxp.blockstream.com/education/glossary/lightning-service-provider)