Microsoft has concluded that so-called ‘layer 2’ solutions are necessary for Bitcoin to scale and is “collaborating” on the technology.
Microsoft: On-Chain Fails To Meet Capacity Needs
In a blog post on Monday, Director of Program Management at Microsoft’s Identity Division Alex Simons said that layer 2 scaling solutions, which principally involve the Lightning Network, are superior to on-chain scaling.
While some blockchain communities have increased on-chain transaction capacity (e.g. blocksize increases), this approach generally degrades the decentralized state of the network and cannot reach the millions of transactions per second the system would generate at world-scale.