What is a layer 2? Rollups and L2 networks explained

A layer 2 (L2) is a separate blockchain network that runs on top of a main blockchain, the layer 1, to make transactions faster and cheaper while borrowing that main chain's security. The term is used mostly for Ethereum, where networks such as Arbitrum, Optimism, Base, Starknet, zkSync and Linea now handle most everyday activity. Bitcoin has its own L2 ideas too, the best known being the Lightning Network.

Why layer 2s exist

Ethereum's main chain can only fit a limited number of transactions in each block. When demand spikes, users bid against each other and fees rise. Making the base chain itself much bigger would make it harder for ordinary people to run a node, which would weaken decentralisation. Ethereum's answer, set out in its "rollup-centric" roadmap, is to keep layer 1 as a secure settlement layer and push most execution to layer 2s. Our Ethereum explainer covers how the base chain itself works.

How a rollup works

Most Ethereum L2s are rollups. The basic cycle looks like this:

1. You send a transaction to the L2. A computer called the sequencer puts it in order and gives you a near-instant confirmation.
2. The sequencer bundles ("rolls up") thousands of transactions into one batch.
3. The batch data is compressed and posted to Ethereum, together with the new state of the L2.
4. Ethereum checks or accepts the result according to the rollup's proof system, and the batch becomes final.

Because thousands of users share the cost of one Ethereum posting, each person pays a fraction of a mainnet fee. Costs fell further after Ethereum's Dencun upgrade in March 2024, which added cheaper data space called "blobs" built for rollups.

Optimistic vs ZK rollups

There are two main ways to convince Ethereum that a batch is correct.

Optimistic rollups are "innocent until proven guilty": a batch is accepted unless someone proves it was wrong during the challenge period. ZK (zero-knowledge) rollups attach a mathematical proof that the batch was computed correctly, so Ethereum does not need to wait for challenges.

Other kinds of "layer 2"

Not everything marketed as an L2 is a rollup:

• Validiums use validity proofs but keep transaction data off Ethereum, which is cheaper but means you depend on whoever stores that data.
• Sidechains such as Polygon PoS run their own validators and only connect to Ethereum through a bridge, so they do not inherit Ethereum's security.
• App-specific and company chains are a growing category. Coinbase's Base is built on Optimism's OP Stack, and Robinhood Chain uses Arbitrum technology. Uniswap just made its aggregator hooks live on Base and Robinhood Chain alongside Ethereum mainnet.

The risks to understand

A rollup's security is not simply "the same as Ethereum". Before moving meaningful amounts, look at four things:

• Sequencer. Most L2s still run a single sequencer operated by the team. If it goes down, the network can pause, and it can briefly reorder or delay transactions.
• Upgrade keys. Many rollup contracts can be changed by a multisig or security council. Independent tracker L2BEAT rates networks in "stages" (0, 1, 2) according to how much users depend on these parties.
• Bridges. Getting funds in and out is the weakest link in crypto security. Use the official bridge or a reputable one; our guide on what a crypto bridge is explains the trade-offs.
• Network mix-ups. Your wallet address is usually the same on Ethereum and its L2s, but the balances are separate. Sending tokens on the wrong network is a common and costly mistake.

Do you need to use one?

If you only hold ETH long-term, you may never touch an L2. If you trade on decentralised exchanges, use DeFi apps, send stablecoins or mint NFTs, an L2 will usually be far cheaper than mainnet. Many exchanges now let you withdraw directly to popular L2s, which avoids bridging altogether. Whatever you choose, keep using a wallet you control, as explained in how to store Ethereum.