Layer 2 (L2)
A secondary protocol built on top of an existing blockchain (Layer 1) that improves transaction speed, reduces costs, and increases scalability without compromising the security of the underlying chain.
A Layer 2 (L2) is a secondary framework or protocol built on top of an existing blockchain (the Layer 1, like Ethereum) to improve its scalability, transaction speed, and cost efficiency. L2s process transactions off the main chain ('off-chain') and submit compressed proofs or transaction data back to the L1 for final settlement and security. The most prominent L2 types are: (1) Optimistic Rollups (Arbitrum, Optimism, Base) that assume transactions are valid by default and only verify when challenged, (2) ZK-Rollups (zkSync, StarkNet, Polygon zkEVM) that use zero-knowledge proofs to cryptographically verify batches of transactions instantly, and (3) State Channels and Sidechains (Polygon PoS) that provide alternative execution environments. As of 2026, Ethereum L2s collectively process approximately 20x the transaction volume of Ethereum mainnet, with fees dropping below $0.02 per transaction — effectively solving Ethereum's scalability challenges. Base (Coinbase's L2) leads in consumer applications, Arbitrum dominates DeFi TVL, and Optimism's Superchain connects multiple interoperable L2s. L2s are the primary reason Ethereum remains dominant despite competition from faster L1s like Solana.