"Bitcoin may now be wired back and forth between the parties on layer 2 w/o needed to be settled individually on the Bitcoin block chain." Cooperatively update the final state would be more precise. And if one party is uncooperative then a timeout contract becomes valid. Your understanding is generally correct. Also bitcoin doesn't use the word crypto which is closely associated with scams. Bitcoin is about the 21 million coin limit so only one currency not cryptocurrencies.