What are layer 2s and why do they exist?

Ethereum was built with security as its highest priority. Every transaction is verified and recorded by a large network of computers. This makes Ethereum reliable and difficult to manipulate, but it also comes with a downside. The network can only process a limited number of transactions at the same time. As Ethereum became more popular, transaction costs increased and the network became less suitable for large-scale use.

This scalability problem is the reason layer 2s were created. Layer 2s are not new blockchains that exist separately from Ethereum, but additional layers that run on top of Ethereum. They are specifically designed to make Ethereum scalable, without compromising the security of the underlying blockchain.

To understand this, it helps to briefly explain what a layer 1 is. Ethereum itself is a layer 1. On this base layer, transactions are finalized and secured. This process is careful and therefore relatively slow and expensive. Ethereum acts as the foundation of the system, strong and reliable, but not designed to handle massive numbers of small transactions at once.

Layer 2 as a scaling solution for Ethereum.

A layer 2 moves a large part of the activity away from the busy main layer. Transactions are first executed on the layer 2, where this can be done much faster and at lower cost. The results of these transactions are then summarized and recorded on Ethereum. This allows users to benefit from speed and low fees, while Ethereum retains its role as the secure settlement layer.

In practice, this difference is immediately noticeable. Transactions cost a fraction of what they would on Ethereum itself and are processed almost instantly. This enables applications that would otherwise be too slow or too expensive to use, such as payments, financial applications and other services that require constant interaction.

This approach is a deliberate design choice by Ethereum. Instead of handling everything on the base layer, scalability is achieved through additional layers. Well-known examples of Ethereum layer 2s include Arbitrum, Optimism and Base.

Not every blockchain needs layer 2s.

It is important to understand that this scalability issue does not apply to all blockchains. Some networks were designed from the start to be scalable on their base layer. Solana is a good example. Rather than adding extra layers, Solana processes large numbers of transactions directly on its layer 1, with low costs and high speed.

This does not mean that one approach is inherently better than the other. Ethereum prioritizes maximum security and decentralization on its base layer, with layer 2s as its scaling solution. Solana chooses a scalable layer 1 that integrates speed and low costs directly into the core of the network.