Layer 2

Layer 2: Scaling Solutions for Expensive Blockchains

Layer 2 networks solve Ethereum’s biggest problem – ridiculous gas fees. They process transactions cheaply and quickly while inheriting Ethereum’s security.

Layer 2 is a separate blockchain or protocol built on top of a main blockchain (Layer 1) to improve scalability and reduce transaction costs. These solutions handle transactions off the main chain, then batch settle results back to Layer 1.

How Layer 2 Works

Rollups bundle hundreds of transactions together and submit cryptographic proofs to Ethereum, splitting gas costs across many users. This reduces individual transaction fees from $50+ to under $1.

State channels allow parties to transact privately off-chain, only settling final balances on-chain. Think of it like opening a bar tab and paying the total at the end.

Sidechains operate as independent blockchains with their own consensus mechanisms, periodically checkpointing to the main chain for security.

Infographic diagram showing transactions processed on Layer 2 and batched to Layer 1 for final settlement

Real-World Examples

  • Polygon – Popular sidechain with sub-cent transaction fees
  • Arbitrum – Optimistic rollup with major DeFi protocol support
  • Lightning Network – Bitcoin’s Layer 2 for instant micropayments

Why Beginners Should Care

Layer 2 makes DeFi accessible to normal people. Instead of paying $100 in gas fees to swap $500 worth of tokens, you pay $2 and get the same security guarantees.

Start with Layer 2 for learning DeFi. Polygon and Arbitrum offer the same protocols as Ethereum mainnet but with affordable transaction costs for experimentation.

Bridge assets carefully between layers – bridge contracts are common targets for hackers and exploits.

Related Terms: Ethereum, Gas Fees, Rollups, Bridge

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