What is Layer 2?

A Layer 2 (or “L2”) is a secondary framework built on top of an existing blockchain (the “Layer 1” or base layer) that processes transactions off the main chain while still inheriting the security guarantees of the underlying network. Layer 2s exist primarily to make blockchains faster and cheaper to use, since Layer 1s like Bitcoin and Ethereum have throughput limits and per-transaction fees that make small, frequent payments impractical.

The most important Layer 2s

• Lightning Network (built on Bitcoin) — see separate entry.
• Optimism, Arbitrum, Base, zkSync, Starknet, Polygon zkEVM (built on Ethereum) — these are called rollups because they “roll up” many transactions into a single transaction that is then settled on Ethereum L1.
• Polygon PoS — an earlier sidechain-style L2 for Ethereum, still in wide use.
• Solana, Avalanche, Fantom — sometimes called “monolithic” chains rather than L2s, but they serve a similar purpose: faster, cheaper transactions than Ethereum L1.

Why Layer 2s matter for payments

For an everyday payment, paying $2 in gas to send $5 of USDC on Ethereum mainnet is not viable. On a Layer 2 like Base, the same transaction costs a fraction of a cent — and confirms in seconds rather than minutes. This is why most merchant payment processors (Coinbase Commerce, for example) now default to Layer 2 networks for stablecoin settlement.

If a merchant advertises that it accepts USDC, ask which network. You will usually want to send on Base, Polygon, or Arbitrum rather than Ethereum mainnet to avoid excessive fees and slow confirmation.