Layer 2 (L2) is a blockchain scalability solution designed to improve the performance of the mainchain by processing transactions off the mainchain and returning them to the base protocol layer for settlement. An L2 solution built on a Layer 1 (L1) blockchain typically improves transaction throughput, resulting in faster and lower-fee transactions for users.
L2 solutions can be introduced as optimistic rollups, where transactions are assumed valid until challenged, for more efficient transaction processing. Zero-knowledge (ZK) rollups are also L2 solutions, but they cryptographically verify the validity of multiple transactions grouped into one before returning them to the mainchain for transaction finality.
L2 systems can also be state channels, where only opening and closing transactions are documented on the L1 blockchain. Widely used L2 networks include Ethereum’s Arbitrum and Optimism L2 solutions, which significantly reduce transaction costs and processing times compared to the mainnet.
