What is a Layer 2 scaling solution?

How do Layer 2 scaling solutions work on Ethereum?
What are some popular Layer 2 scaling solutions for Ethereum?
A Layer 2 scaling solution is an approach to increase the capacity and throughput of a blockchain network, particularly in the context of decentralized applications and cryptocurrencies. These solutions aim to address the limitations of Layer 1, the underlying blockchain protocol, which often suffers from scalability issues, high transaction fees, and slow transaction times.
Layer 2 scaling solutions work on top of the existing blockchain (Layer 1) and are designed to handle a higher volume of transactions with faster processing times and lower fees. They achieve this by offloading some of the computational load and transaction processing from the main blockchain to secondary or off-chain networks. By doing so, they help reduce congestion and improve the overall efficiency of the network.
There are several types of Layer 2 scaling solutions including:
State Channels: These are private, off-chain channels established between two or more parties, enabling them to transact directly without broadcasting every transaction to the main blockchain. Once the channel is closed, the final state of the channel is settled on the main blockchain.
Plasma: This is a framework for creating child chains connected to the main blockchain. These child chains operate independently, with their transactions anchored to the main chain at regular intervals. This allows for faster, cheaper transactions within the child chains.
Rollups: These are solutions that aggregate multiple transactions into a single proof, which is then submitted to the main blockchain. There are two main types of rollups – zk-rollups (based on zero-knowledge proofs) and optimistic rollups (relying on fraud proofs).
Sidechains: These are separate blockchains that run parallel to the main blockchain, allowing for faster and cheaper transactions. They are connected to the main chain through a two-way peg, enabling assets to be moved between the two chains.
Layer 2 scaling solutions have become increasingly important in the blockchain ecosystem as they help overcome some of the performance limitations and improve the user experience for decentralized applications and cryptocurrency transactions.