What Is Layer 2?
Also known as: L2, Second Layer, Layer 2 Scaling Solution
In short
Layer 2 is a scaling solution that processes transactions outside the main blockchain (Layer 1) and ties the results back to it, offering faster and cheaper transactions while inheriting its security largely from the main chain.
Layer 2 solutions batch many transactions off the main chain and write only summary data or proofs to Layer 1. This way, the limited block space on the main chain is shared among many more users and the cost per transaction falls. On Bitcoin, the best-known example is the Lightning Network, which relies on payment channels; on Ethereum, rollups stand out.
Rollups fall into two main types. Optimistic rollups (Arbitrum, Optimism) treat transactions as valid by default and allow a period to challenge faulty ones; zk-rollups produce a zero-knowledge proof for each batch of transactions to show their validity mathematically. The blob transactions (EIP-4844) that arrived with Ethereum's Dencun upgrade in March 2024 significantly reduced the cost of data publishing for rollups.
Using Layer 2 also has risks: on some networks, the sequencer that orders transactions is still run by a single operator, smart contract upgrade powers rest with a limited group, and withdrawing funds from optimistic rollups to the main chain can take days. Bridges used to move assets between networks pose a separate security risk as well.
Last updated: · This content is for information purposes only and is not investment advice.