Layer 2

How does layer 2 work?

On Ethereum, a layer 2 is often a so-called rollup. It executes transactions outside the Ethereum network, bundles them together and then posts the data to Ethereum. Many transactions share the cost of a single entry on the base network, so the network feeNetwork feeA fee paid to a crypto network, not to a bank or company, for including your transaction in a block. per transaction falls.

Think of the post. Instead of sending a hundred letters in a hundred envelopes, you put them all in one box.

There are two main approaches:

• Optimistic rollups assume the transactions are valid unless someone challenges them within a set period.
• ZK-rollups include a mathematical proof that the transactions are valid.

Arbitrum, Base and Optimism are examples of layer 2 networks on Ethereum. The Lightning NetworkLightning NetworkA payment network on top of Bitcoin that makes bitcoin payments almost instant and cheap, without recording each payment on the blockchain. is a layer 2 on Bitcoin.

What to know

• Same address, different network. Layer 2 networks on Ethereum use the same kind of wallet address as Ethereum itself. Always check that the recipient supports the blockchain networkBlockchain networkThe blockchain a cryptocurrency or token is recorded and sent on, such as the Bitcoin network or the Ethereum network. you are sending on.
• Moving funds needs a bridge. To move crypto between a layer 1 and a layer 2, you use a BridgeBridgeA service that moves crypto or tokens between two blockchain networks, usually by locking the asset on one network and issuing an equivalent on the other.. Withdrawing from an optimistic rollup back to Ethereum through its official bridge can take about a week.
• Not fully decentralised. On many layer 2 networks, a single operator still puts the transactions in order.