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Paper Number
1501
Paper Type
Complete
Description
Numerous studies have raised concerns over the limited scalability of blockchain technologies and, in particular, Bitcoin. Layer 2 technologies have emerged as an advanced array of complementary innovations designed to solve this problem. Despite the growing optimism around layer 2 technologies, however, there is little evidence to show how they impact blockchain’s long-term success. This paper argues that the use and expansion of layer 2 technologies have a positive impact on the adoption and security levels of the underlying blockchain systems. Building on the Bitcoin and Lightning Network case, we use a time-series model based on 1,494 daily observations to demonstrate that the growing activity on the Lightning Network precipitates increased use and better security for Bitcoin. These results highlight the importance of layer 2 technologies for blockchain systems and suggest several further research avenues in this nascent domain of inquiry.
Recommended Citation
De Rossi, Leonardo Maria; Avital, Michel; Gleasure, Rob; and Solcia, Rebecca, "The Impact of Layer 2 Technologies on the Adoption and Security of Blockchain" (2022). ICIS 2022 Proceedings. 6.
https://aisel.aisnet.org/icis2022/blockchain/blockchain/6
The Impact of Layer 2 Technologies on the Adoption and Security of Blockchain
Numerous studies have raised concerns over the limited scalability of blockchain technologies and, in particular, Bitcoin. Layer 2 technologies have emerged as an advanced array of complementary innovations designed to solve this problem. Despite the growing optimism around layer 2 technologies, however, there is little evidence to show how they impact blockchain’s long-term success. This paper argues that the use and expansion of layer 2 technologies have a positive impact on the adoption and security levels of the underlying blockchain systems. Building on the Bitcoin and Lightning Network case, we use a time-series model based on 1,494 daily observations to demonstrate that the growing activity on the Lightning Network precipitates increased use and better security for Bitcoin. These results highlight the importance of layer 2 technologies for blockchain systems and suggest several further research avenues in this nascent domain of inquiry.
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07-Blockchain