Overview
Layer 2, or L2, refers to scaling solutions built on top of Layer 1 blockchains that process transactions off-chain while inheriting the base layer's security. By moving computation and data away from the congested main chain, L2s offer lower fees and higher throughput. The most prominent L2s, such as Arbitrum, Optimism, and zkSync, scale Ethereum.
How It Works
An L2 batches or executes transactions outside the main chain and settles the resulting state on Layer 1, using mechanisms that keep the base chain the final arbiter of truth. Rollups post compressed transaction data or validity proofs to Ethereum; other L2 designs include plasma-style constructions and state channels. Users interact with L2s through standard wallets, paying much lower gas while receiving security guarantees anchored to the L1.
Why It Matters
Layer 2s make blockchains usable for mainstream applications by reducing cost and latency while preserving decentralization. They have become the default place to build and transact on Ethereum as of 2026, hosting most DeFi activity and daily users. Understanding how L2s differ in trust assumptions, finality, and upgradeability is key to evaluating any project built on them.
Related Concepts
Rollups are the dominant L2 family, split into Optimistic Rollups and ZK-Rollups. They interact with Bridges for asset transfers, and their stacks are increasingly Modular, separating execution, settlement, and data availability.