Blockchain layers refer to the different functional levels within the blockchain ecosystem. Each layer performs a specific role — from infrastructure and security to scaling and application delivery. This layered architecture makes blockchains more modular, scalable, and easier to innovate on.
Layer 2 fits into this system as the scaling layer. It is built on top of Layer 1 blockchains like Ethereum or Bitcoin to reduce congestion, lower fees, and increase transaction speed. While Layer 1 handles security and consensus, Layer 2 processes most activity off-chain, then sends results back for final settlement. This allows blockchain networks to scale efficiently without changing their core structure.
In other words, Layer 2 extends the functionality of the base blockchain by sharing its workload — which helps blockchains support more users, faster applications, and real-world adoption.
| Blockchain Layer | Purpose | Key Functions | Examples |
| Layer 0 | Foundation infrastructure for blockchain networks | Internet protocols, hardware, inter-chain communication | Polkadot, Cosmos, Avalanche |
| Layer 1 | Core blockchain protocol and base network | Consensus mechanism, on-chain transactions, security | Bitcoin, Ethereum, Cardano, Solana |
| Layer 2 | Scalability layer that operates on top of Layer 1 | Off-chain computation, faster and cheaper transactions, reduced congestion | Lightning Network (BTC), Arbitrum, Optimism |
| Layer 3 | Application layer hosting dApps and smart contract interfaces | User-facing applications, APIs, middleware enabling interaction with underlying layers | dApps (Uniswap, OpenSea), WalletConnect |
Why Was Layer 2 Introduced?
Layer 2 was introduced to solve the scalability crisis faced by major blockchains like Ethereum and Bitcoin. As demand for decentralized apps (dApps), DeFi, and NFTs surged, base-layer networks struggled to keep up — leading to high fees, slow confirmations, and poor user experience.
According to CoinDesk, Layer 2 solutions are secondary blockchains built on top of Layer 1 chains specifically to “help with scalability and speed.” These networks, such as Arbitrum, Optimism, and zkSync, reduce the computational load by processing transactions off-chain and periodically posting summaries or proofs to the main chain for final settlement.
See, this approach addresses a well-known issue in blockchain design called the Blockchain Trilemma — a term introduced by Ethereum’s Vitalik Buterin. It highlights the difficulty of achieving scalability, decentralization, and security simultaneously. Ethereum, for example, prioritizes decentralization and security, which limits its transaction throughput to around 15–30 transactions per second. By contrast, traditional payment networks like Visa handle thousands of TPS — creating a clear performance gap Layer 2 aims to close.
Layer 2 reduces this pressure by taking over much of the transactional burden. This makes Layer 1 chains like Ethereum more usable without needing to change their core structure, which is costly and politically complex. As CoinDesk notes, Layer 2s are becoming critical infrastructure for blockchain adoption, not just optional add-ons.
In short, Layer 2 was introduced because Layer 1 networks could no longer scale fast enough to support the real-world use cases they were unlocking.
How Does Layer 2 Work?
Layer 2 takes the pressure off a blockchain’s base layer by moving most transaction activity away from it. Instead of processing everything directly on Layer 1, Layer 2 handles transactions separately and then sends the final results back to Layer 1 for confirmation.
This setup increases speed and reduces gas fees while still relying on the security of the main chain. Layer 1 acts as the source of truth. It finalizes and stores only the essential data, not the full transaction history.
Each Layer 2 solution uses a different method:
- Rollups bundle many transactions and post a single proof to the main chain.
- Sidechains run independently but stay connected to Layer 1 through a bridge.
- State channels let users transact off-chain and settle the final state on-chain.
- Nested chains divide tasks among smaller chains that report back to a main chain.
Layer 2 works by shifting execution upward while keeping trust anchored below. The base layer stays secure. The second layer handles speed.
Major Layer 2 Crypto Projects
Layer 2 projects scale blockchain use without overloading the main network. They handle transactions off-chain, reduce fees, and speed up processing. Each follows a specific approach—rollups, sidechains, or state channels—but all aim to improve user experience.
Here’s the list of the most widely adopted Layer 2 networks, grouped by their core technology.
Rollup-Based Projects
- Arbitrum
- Optimism
- zkSync
- StarkNet
- Polygon zkEVM
- Scroll
- Base
- Boba Network
- Linea
- Taiko
Sidechains
- Polygon PoS
- Ronin
- Gnosis Chain
- Liquid Network (Bitcoin)
- Rootstock (RSK)
State Channels
- Lightning Network (Bitcoin)
- Raiden Network (Ethereum)
- Celer Network
Nested/Plasma Chains
- OMG Network (Plasma)
- Matic Plasma (early Polygon)
NFT/Gaming-Focused Layer 2s
- Immutable X
- Ronin
- ApeChain (Arbitrum-based)
- Xai (Arbitrum Orbit)
What are the Benefits and Risks of Layer 2 Crypto?
| Benefits | Risks |
| Lower transaction fees | Security depends on the design of the Layer 2 protocol |
| Faster transaction speeds | Centralization risks in validator selection or bridges |
| Reduced network congestion on Layer 1 | User funds may be vulnerable in poorly maintained bridges |
| Enhanced scalability for dApps and smart contracts | Less mature infrastructure compared to Layer 1 |
| Improved user experience on blockchain platforms | Withdrawal delays on some rollup-based solutions |
| Supports high-volume use cases like gaming and DeFi | Smart contract bugs can affect transaction validity |
| Can inherit Layer 1 security (depending on model) | Not all dApps or tokens are supported on every Layer 2 |
| Flexible architecture options (rollups, sidechains, etc.) | Cross-chain interoperability issues |
Challenges of Layer 2 Solutions
- Security Dependence on Layer 1: Any vulnerability in the base layer can affect Layer 2 integrity.
- User Experience: Bridging assets between Layer 1 and Layer 2 can be complex and confusing.
- Limited Interoperability: Most Layer 2s operate in isolation with limited support across other networks.
- Liquidity Fragmentation: Funds get split across chains, reducing capital efficiency.
- Centralization Risks: Some solutions rely on centralized sequencers or validators.
- Withdrawal Delays: Rollups like Optimistic Rollups often have long withdrawal times (e.g., 7 days).
- Developer Fragmentation: Different Layer 2 standards can complicate app development and deployment.
- Regulatory Uncertainty: New technologies often face unclear legal frameworks.
Final Thoughts
Layer 2 is key to scaling blockchain without losing security or decentralization. It enables faster, cheaper transactions and unlocks new use cases. To move forward, explore leading L2 projects, compare architectures, and follow how Ethereum evolves alongside them. The future of crypto depends on understanding the layers beneath it.
