Layer 2 is currently used as an umbrella term for all operations that are performed “off chain” and use blockchains to settle transactions. This is based on the work of Tadge Dryja, who is one of the authors of the Lightning Network paper, and he continues to lead the DCI’s research in this area. The Lightning Network is one of the first applications of payment channels, and we’re confident we’ll see more. Another application we’ve been working on involves smart contracts. In order to create useful smart contracts, we need oracles, data feeds that verify real-world occurrences and submit this information in a format that can be used in a blockchain.