Layer 2
A Layer 2 is a network built on top of a base blockchain: it processes transactions itself and posts only a compressed summary back to the main chain. Hence fees in cents rather than dollars, while keeping the base layer's security.
How it works
Thousands of operations are gathered off the main chain, compressed into one batch and posted back as a single entry. The cost of that one transaction is split across everyone in the batch, which is why a transfer costs cents.
There are two approaches to proving honesty. Optimistic rollups (Arbitrum, Base, Optimism) assume a batch is valid and allow a window to challenge it. Zk-rollups attach a cryptographic proof immediately, so no waiting window is needed.
Which creates a practical difference: withdrawing back to the main chain from an optimistic rollup takes about a week by the official route. Third-party bridges do it in minutes, and that speed is paid for with trust in the bridge.
The difference in cost
The same swap on Ethereum mainnet and on a Layer 2.
| Swap on Ethereum | $3–30 |
| Swap on a Layer 2 | $0.01–0.20 |
| Wallet-to-wallet transfer | < $0.01 |
A gap of tens to hundreds of times. It is what makes viable the things that make no sense on mainnet: micropayments, in-game actions, frequent rebalancing.
What to keep in mind
- It is a separate networkSending tokens to an Arbitrum address you also use on Ethereum lands at the same address but in a different network. Check which network is selected before sending.
- Withdrawals can be slowThe official exit from an optimistic rollup takes about seven days. Plan for it in advance rather than when the money is needed.
- Sequencer centralisationIn many L2s a single operator decides transaction order. It works fast, and it is a single point of failure.
- Liquidity is fragmentedThe same pair can be deep on one network and nearly empty on another. Check the pool on the network you are actually trading on.