What is a Layer 2?

A Layer 2 (L2) is a scaling protocol built on top of a Layer 1 (most often Ethereum) that processes transactions off the main chain while still anchoring final settlement on L1. The two dominant families are optimistic rollups (Arbitrum, Optimism) and zero-knowledge rollups (zkSync, Starknet, Polygon zkEVM). Optimistic rollups assume transactions are valid and rely on a 7-day fraud-proof window to challenge bad state updates. ZK-rollups generate cryptographic validity proofs for each batch, achieving faster finality at higher computational cost. L2s typically reduce gas costs by an order of magnitude — from $1-5 to $0.01-0.50 — which unlocks micro-transactions, gaming, and social applications that are uneconomic on L1. Bridges are required to move funds; native bridges are usually safer than third-party fast bridges, which carry smart-contract exploit risk. EIP-4844 (proto-danksharding) further reduced L2 costs in 2024. When evaluating an L2, look at TVL, ecosystem maturity, decentralization roadmap, and sequencer risk (the operator that orders transactions).