Many blockchains have now started thinking about layer 2 solutions. Bitcoin is just one good example to consider. We cannot do everything on just the main layer alone. The transaction cost is high and the transaction speed is also very slow. Considering all these factors, many experts have created some layer 2 solutions on certain blockchains that are scalable and also work for our needs. One of the best examples of a layer 2 solution on Hive is the Hive Engine. It has one of the biggest adoptions on Hive. There is still a problem with scalability on Hive Engine.
Currently, the database size is at an acceptable level but it is gradually increasing for a full node and there is a high chance that after a few years, something has to be done to sustain the size of the Hive Engine full node databases. Hive Engine is a smart solution for a second layer on Hive but it came up with a lot of limitations and one of the biggest problems I see with Hive Engine is that there is no proper budget available and no maintenance or innovation being done around Hive Engine. This is not the case with all the second-layer blockchains. Some of the second-layer blockchains are highly successful on other blockchains too. Let's see why it is important to have a second-layer blockchain.
Not all the traffic needs to have to go to the first layer blockchain. There is a high chance that some activities might require high network consumption or sometimes even CPU power to calculate something. Having just a small transaction on the main chain and doing all the necessary heavy work on the layer 2 blockchain is the way to go. This way, the transactions are lightweight on the main blockchain and they become heavy weight on the layer 2 blockchain. This helps in better use of the network and makes it easy to scale up.
Not all the transactions have to be confirmed on the main chain alone. With the help of layer 2, the confirmations can happen on the second layer. This will also increase the time taken for block processing and transaction confirmations. Sometimes they say that the second layer can take more time to confirm than layer 1 but it is subjective because it can be done in both ways. This faster confirmation can usually help in gaming. Having a second-layer solution can help in games that require faster responses.
Having things on the second layer can be a cost-effective solution. Of course, on the Hive blockchain, every transaction is anyways free but on other blockchains where the transaction cost is high, this can be very helpful. The frequent transactions can be kept on a layer 2 blockchain and it can be made a cost-effective solution. It can even be built in such a way that the cost of the main chain is either split or it can be made free on layer 2.
Some layer 2 blockchains can also be a centralized solution where companies who would like to operate on layer 2 blockchains can have their code running on layer 2 and have their projects on that. This can be completely a private blockchain and maybe the node confirmation part alone can be with consensus so that it helps in distributed block production. There are multiple ways to look at it and execute it.
If you like what I'm doing on Hive, you can vote me as a witness with the links below.
@balaz as a Hive Witness 
@kanibot as a Hive Engine Witness|
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