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What is Layer 2 (L2)?
Layer 2 solutions are built on top of existing blockchains (like Ethereum) to process transactions faster and cheaper while inheriting the base layer's security. Examples: Polygon, Arbitrum, Base.
Full Explanation
Layer 2 (L2) refers to secondary frameworks built on top of Layer 1 blockchains (Ethereum, Bitcoin) to improve scalability. L2s process transactions off the main chain and periodically settle back to L1, inheriting its security. Types: Rollups (Optimistic: Arbitrum, Base; ZK: zkSync, StarkNet), Sidechains (Polygon PoS), State Channels (Lightning Network for Bitcoin). L2s reduce gas fees from $5-50 to $0.01-0.50 while maintaining Ethereum's security guarantees. TVL across Ethereum L2s exceeds $30 billion.
Example
Swapping tokens on Arbitrum costs $0.10 vs $5-20 on Ethereum mainnet. Both settle to Ethereum for security. Base is another popular L2.