The emergence of the smart contract feature in blockchains, popularized by Ethereum, demonstrated the technology's potential to transform all aspects of the finance industry through tokenization, trustless platforms, and decentralized governance.
Ethereum set the standard but has faced persistent issues like network congestion and high transaction fees. The growing need for scalability paved the way for the development of layer 2 networks, which are blockchains built atop existing layer 1s to boost scalability.
The Lightning Network introduced a payment channel solution capable of handling thousands of transactions per second off-chain. It enables any two parties to create an off-chain channel and exchange high volumes of BTC at a low cost.
To unlock the full potential of Ethereum dApps, developers introduced more advanced layer 2 technologies, including sidechains and rollups, enabling compatibility with the Ethereum Virtual Machine (EVM), greater scalability, and lower transaction costs.
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