How L1 versus L2 works
A layer 1 (L1) is a base blockchain like Bitcoin or Ethereum that settles and secures its own transactions. A layer 2 (L2) is a separate network built on top of an L1 to process transactions faster and cheaper, then post a compressed proof back to the L1 for final security. The idea is to keep the L1’s security while moving the bulk of activity to a faster, lower-fee layer above it.
Worked example
Sending a transaction directly on Ethereum (an L1) can cost meaningful gas when the network is busy. The same transaction on an L2 built atop Ethereum might cost a fraction of a cent, because the L2 batches many transactions together and settles them on the L1 as one. You get near-L1 security at a tiny fraction of the cost, the core promise of scaling through layers.
L1, L2, and trading
The L1-versus-L2 design matters for on-chain users weighing speed, cost, and security, and it shapes the long-term investment case for the coins involved. On Volity, you take exposure to major L1 and L2 tokens as spot or CFDs without running nodes or bridging assets between layers yourself. Understanding the stack explains why fees and speeds differ so much across chains.
Why it matters
The L1-versus-L2 split is how crypto tries to scale without sacrificing security, so it underpins the value thesis of many of the largest tokens. Know which layer a coin lives on and what problem it solves. Related: gas fee and smart contract.
Learn more in our crypto trading guide.
