A Layer 2 (L2) is a secondary network built on top of a main blockchain (Layer 1, mainly Ethereum) to solve its throughput and cost issues. It processes transactions off the main chain, then periodically publishes "proofs" on L1, inheriting its security.
Why L2s exist: Ethereum L1 caps at ~15-30 TPS and gas fees can exceed $50 during peaks. L2s scale to 1,000-10,000 TPS with $0.01-$0.50 fees.
Main technologies:
- Optimistic Rollups (Arbitrum, Optimism, Base): "optimistic" because transactions are assumed valid unless proven otherwise (fraud proofs). 7-day challenge period for L1 withdrawals.
- ZK Rollups (zkSync, StarkNet, Polygon zkEVM): use cryptographic proofs (zero-knowledge) to validate transaction batches. Faster finalization (hours vs days), but technically more complex.
- Channels / sidechains: Polygon PoS, Bitcoin Lightning Network. Faster but less secure (separate validators).
Top L2s by TVL (mid-2026):
- Arbitrum: ~$15-20B TVL
- Base (Coinbase): ~$10-15B
- Optimism: ~$5-8B
- zkSync, StarkNet: ~$2-5B each
How to use them:
- Have ETH on Ethereum L1
- Use an official bridge to transfer to L2 (e.g., Arbitrum Bridge, Base Bridge)
- On the L2, interact with DeFi protocols (Uniswap, Aave) at ~50× lower fees
- To return to L1: withdraw via bridge (instant for ZK rollups, 7 days for Optimistic — unless using third-party "fast bridges" at 0.1-0.3% fee)
Dencun upgrade (2024) on Ethereum: introduced "blobs" that cut L2 costs 10-100×. A Uniswap transaction on Arbitrum now costs ~$0.02 vs $1-5 before Dencun. One of the main drivers of Ethereum ecosystem adoption.