What is a layer 2?
A network built on top of a blockchain that processes transactions cheaply off the main chain while still settling to it for security.
Layer-2 systems — most commonly rollups — batch many transactions and post compressed data or proofs back to the base layer. Users get much lower fees while inheriting the base chain’s security guarantees.
Why it matters: it is the mainstream answer to gas costs, and much Ethereum activity has already moved there. The trade-offs are real: withdrawing to the base layer can involve a delay, and many rollups still rely on a single operator to sequence transactions, which is a centralisation point being actively worked on rather than solved.
Related terms
- Market capitalisationThe current price of an asset multiplied by its circulating supply — a rough…
- ConsensusThe process by which a decentralised network agrees on which transactions happened and in…
- LiquidityHow easily an asset can be bought or sold in size without moving its…
- LiquidationThe forced closure of a leveraged position by an exchange or protocol when the…
- VolatilityHow much and how quickly an asset's price moves, in either direction.
- Cold storageKeeping private keys on a device that has never been connected to the internet,…
Crypto assets are volatile and high-risk. Prices shown are indicative and may be delayed. Always do your own research. Coinpric does not provide financial advice.