What is Layer 2?

Layer 2 (L2) solutions address one of the central challenges in blockchain design: the trade-off between scalability, security, and decentralization — sometimes called the blockchain trilemma. Base-layer blockchains like Ethereum prioritize security and decentralization but have limited throughput, resulting in congestion and high fees during periods of high demand.

Layer 2 networks handle transactions in bulk off-chain and periodically submit compressed proofs or summaries to the Layer 1, inheriting its security while dramatically increasing capacity. Common L2 designs include:

• Optimistic rollups: Bundle many transactions into a single batch submitted to Layer 1. They assume transactions are valid by default (optimistic) and allow a challenge window during which fraud can be disputed. Examples: Optimism, Arbitrum.
• Zero-knowledge rollups (ZK-rollups): Generate a cryptographic proof that all transactions in a batch are valid, submitted along with the batch. Faster finality than optimistic rollups but more computationally intensive to generate proofs. Examples: zkSync, StarkNet, Polygon zkEVM.
• State channels: Allow two or more parties to conduct many transactions off-chain, only recording the opening and closing states on-chain. The Bitcoin Lightning Network uses this approach.
• Sidechains: Separate blockchains with their own consensus mechanisms that connect to a main chain via a bridge. They offer scalability but have different security assumptions.

Gas fees on major Ethereum L2 networks are often a fraction of those on the Ethereum mainnet, making applications practical for smaller transactions. Users must bridge assets from Layer 1 to interact with a specific L2, and bridging carries its own technical and security considerations.