Layer 2 (L2)
Definition
A secondary blockchain network built on top of a main chain (like Ethereum) that processes transactions faster and cheaper while inheriting the security of the underlying Layer 1.
Layer 2 solutions address blockchain scalability — the challenge of processing many transactions quickly and cheaply on networks like Ethereum. While Ethereum's main chain (Layer 1) can handle roughly 15-30 transactions per second at variable cost, Layer 2 networks process thousands of transactions per second at a fraction of the cost.
The main L2 approaches are optimistic rollups (Arbitrum, Optimism, Base) and zero-knowledge rollups (zkSync, StarkNet, Polygon zkEVM). Both bundle many transactions off-chain and submit compressed proofs to Ethereum, inheriting its security while dramatically reducing per-transaction costs.
Optimistic rollups assume transactions are valid and only check them if challenged (within a dispute window). ZK rollups use cryptographic proofs to mathematically verify every batch of transactions. ZK rollups are more technically complex but offer faster finality and stronger security guarantees.
Layer 2 usage has grown dramatically. Arbitrum and Base each regularly process more transactions than Ethereum mainnet, with fees often below $0.01 compared to dollars or tens of dollars on mainnet during congestion. Major DeFi protocols, NFT platforms, and applications are available on multiple L2 networks.
For portfolio tracking, L2 activity requires connecting to L2-specific RPCs and block explorers. Tokens and positions on Arbitrum are separate from mainnet Ethereum, even though they share the same underlying security. Bridging assets between L1 and L2 creates additional transactions that need tracking for tax purposes.
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Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
Is Layer 2 as secure as Ethereum mainnet?
L2s inherit Ethereum's security for transaction validity — funds cannot be stolen through invalid state transitions. However, L2s have additional trust assumptions (sequencer centralization, upgrade keys) that mainnet doesn't have. These risks are being addressed as L2s mature and decentralize.
How do I move assets to a Layer 2?
Use the official bridge for each L2 (Arbitrum Bridge, Optimism Bridge, Base Bridge) or a cross-chain bridge like Across. Bridging from L1 to L2 typically takes minutes and costs a mainnet gas fee. Some exchanges support direct withdrawals to L2 networks, avoiding bridge fees entirely.