Layer 2

As Bitcoin has become more popular, the limit began to slow down transactions. A block is added to the chain every ten minutes. With a limit on its size, only so many transactions can be added, as many as fit in a block. Globally, bitcoin cannot currently support transactions with anything like the speed of other currencies or credit cards. It sometimes takes hours to confirm a transaction. Some sites work around this problem, by conducting "off-chain payments", conducting transactions without waiting for confirmation by the blockchain.


Transaction data is permanently recorded in files called blocks. They can be thought of as the individual pages of a city recorder's recordbook (where changes to title to real estate are recorded) or a stock transaction ledger. Blocks are organized into a linear sequence over time (also known as the blockchain). New transactions are constantly being processes by miners into new blocks which are added to the end of the chain and can never be changed or removed once accepted by the network (although some software will remove orphaned blocks).

Lightning Network

The Lightning Network is a "layer 2" payment protocol that operates on top of a blockchain-based cryptocurrency (like bitcoin). It is intended to enable fast transactions among participating nodes and has been proposed as a solution to the bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without delegating custody of funds. Lightning Network implementation also simplifies atomic swaps. Normal use of the Lightning Network consists of opening a payment channel by committing a funding transaction to the relevant base blockchain (layer 1), followed by making any number of Lightning Network transactions that update the tentative distribution of the channel's funds without broadcasting those to the blockchain, optionally followed by closing the payment channel by broadcasting the final version of the settlement transaction to distribute the channel's funds.


In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold. In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price. In a relatively illiquid market, an asset must be discounted in order to sell quickly. Money, or cash, is the most liquid asset, because it can be "sold" for goods and services instantly with no loss of value. There is no wait for a suitable buyer of the cash. There is no trade-off between speed and value. It can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs. A liquid asset has some or all of the following features: It can be sold rapidly, with minimal loss of value, anytime within market hours. The essential characteristic of a liquid market is that there are always ready and willing buyers and sellers. It is similar to, but distinct from, market depth, which relates to the trade-off between quantity being sold and the price it can be sold for, rather than the liquidity trade-off between speed of sale and the price it can be sold for. A market may be considered both deep and liquid if there are ready and willing buyers and sellers in large quantities.