I mean I am struggling to fully understand the limitations of lightning, like why would I need to use any other chain if everything can effectively be done on a BTC layer 2? What are the limitations of the lightning network?
If you have some reading material on the lightning network that may help me that would be really appreciated.
Since you mention BTC layer 2 it means they use another chain than the mainnet. Like lightning networks or other off-chain networks like ERC20 and BEP20 they are just used to help the issue of the congested network with cheaper transaction fees when you need to transfer your coins to other exchanges but the problem is not all exchange support lightning network look at Binance I use binance but they don't yet added it on their payment method except to another layer 2 ERC20 and BEP2/20.
So it means you are going to use a other chain than the mainnet.
If you are looking for a great source to learn about lightning then check this link below
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https://github.com/tmlee/awesome-lightning-network