Key takeaways
Layer 2 solutions offer faster and cheaper transactions compared to the main Ethereum blockchain. There are several Layer 2 blockchains that are enjoying mass adoption. Different Layer 2 technologies determine the trade-offs between speed, security and cost that the different solutions use.
Top 5 Ethereum L2 Projects
Polygon (MATIC)
Best mainstream layer 2
Daily active users
400,000
Transactions per second
65,000
Polygon is one of the most popular Layer 2 solutions for Ethereum. It processes transactions for a wide variety of trading applications, blockchain games and more. In fact, major web2 companies like Meta and Reddit rely on Polygon to power the blockchain-enabled parts of their applications.
Advantages
Cheap, fast and efficient blockchain that supports a wide range of use cases. More than 400,000 daily active users The project is backed by big names like Coinbase Ventures
Disadvantages
Polygon’s proof-of-stake (PoS) consensus mechanism has been criticized for being too centralized in the past. Layer 2s like Polygon are generally not quite as secure as the main Ethereum chain
Decision
Best for developers
Review
4.7
Daily active users
130,000
Transactions per second
40,000
Arbitrum is a rollup based layer 2 and also one of the largest Ethereum scaling solutions. The Arbitrum airdrop in March 2023 resulted in over $1 billion dollars in wealth creation for users of the platform as they all received free ARB tokens in their wallets.
Advantages
Over 3.9 million users Large ecosystem that includes NFT marketplaces, blockchain games, stablecoins and much more. Supported by some of the biggest decentralized finance (DeFi) apps, including 1inch, Aave, Balancer, and more
Disadvantages
Arbitrum is not a standalone chain and therefore relies on the security of the underlying Ethereum chain to operate. The optimistic roll-up technology of Arbitrum means that withdrawals of funds can take up to a week
Optimism
Best for Ethereum compatibility
Review
4.5
Daily active users
40,000
Transactions per second
2000
Optimism is another popular rollup scaling solution for the Ethereum ecosystem. The project was launched in 2019 and has since become one of the largest Layer 2 solutions, with a TVL of nearly $1 billion.
Advantages
Saved users over $1 billion in gas fees compared to EthereumOptimism “quests” allow users to earn rewards for more information about the Optimism ecosystem. The Optimism team promised a “season of airdrops” for regular users
Disadvantages
Optimism currently uses a single “sequencer” to order transactions before they are submitted to Ethereum, which introduces a significant level of centralization. “Optimistic sequencing” technology is still quite new and not fully tested
StarkEx
Best for high performance
Review
4.5
Transactions per second
N/A
StarkEx is a scaling solution that is a little different from the others on the list. It relies on “zero-knowledge proofs” which is a faster and more secure scaling mechanism. By using zero-knowledge credentials, StarkEx can provide low gas fees and fast transactions without compromising security.
Advantages
Trusted by some of the most popular Ethereum projects including Sorare, ImmutableX and dYdX, over 100,000 users Batch transactions for much higher throughput
Disadvantages
No knowledge proof technology is complex and can take a while for beginners to understand Unlike many other Layer 2s, StarkEx does not have a platform token that you can buy and trade
Review
4.7
Transactions per second
N/A
zkSync is another layer 2 that uses zero-knowledge (ZK) proofs to scale the Ethereum blockchain. zkSync is committed to not only scaling the speed of the Ethereum blockchain, but to preserving its values of freedom, self-sovereignty and decentralization.
Advantages
zkSync takes security seriously – bugs offer up to $2.3 million for disclosing critical security flaws All code is open source providing transparency and trust.
Disadvantages
zkSync’s emphasis on security means the platform is experiencing a slow rollout Not nearly as common as other Layer 2s like Polygon and Arbitrum
What are Ethereum Layer 2 (L2) protocols?
Ethereum is one of the most popular blockchains. However, its focus on strict security and decentralization means that the blockchain can only process about 14 transactions per second. Because of this, Ethereum transaction costs are usually very high, and transactions can take a long time to process.
“Layer 2” solutions are blockchains built on top of (or parallel to) the Ethereum blockchain used to scale its capabilities. These chains usually process many more transactions per second for much less fees. However, in return, Layer 2 blockchains are usually more centralized and not as well secured as the main “Layer 1” Ethereum chain.
As an analogy, you can think of the Ethereum network as the US Postal Service – or the main mail carrier in a government-owned country. It is reliable, secure and available to everyone, but it often suffers from congestion, delays and relatively high costs due to its wide reach and demand.
Layer 2s, on the other hand, are like private delivery services. There are many more of them, and they can transfer packages faster and cheaper. On the other hand, they do not have the credibility of the main postal service and may not be trusted by everyone to send the most important packages.
Why do we need L2 solutions?
Many popular blockchain projects build their services on Layer 2 blockchains to offer their users more affordable trading, gaming, lending and much more. Big tech companies like Reddit and Meta are choosing to use Layer 2 solutions to bring their web3 offerings to the masses at a low cost.
The Ethereum blockchain has upcoming upgrades that will scale the capacity of the network. However, there are already several proven Layer 2 projects, and the bridges should use them, which will most likely continue to see wide adoption even as the main Ethereum chain improves.
L1 vs. L2
Layer 1
Average transaction fees are $5+Transactions per second are limited to around 14 Security is a top priority which hampers the speed of the blockchain Fully decentralized – cannot be changed or stopped without mass consensus
Layer 2
Average transaction fees are less than $1 Can potentially process hundreds of thousands of transactions per second Security is still very tight but can sometimes be compromised in favor of speed Some Layer 2 chains are much more centralized than Layer 1s, leading to concerns about their reliability and independence
What are Ethereum Digests?
Optimism, Arbitrum, StarkEx and zkSync are all examples of Ethereum “rollups”. A digest is a type of Layer 2 scaling technology that processes transactions off-chain and then submits them all together in a “digest” to the main Ethereum chain.
There are two types of rollups:
Optimistic rollups: Optimistic rollups assume that all transactions within the rollup are valid, and they are automatically submitted to the main Ethereum chain. If a transaction is not valid, there is a specific time window within which anyone can submit “evidence of fraud” proving that the transaction is incorrect. This allows the chain to process transactions quickly and only do extra work if a transaction is proven to be fraudulent. Arbitrum and Optimism are examples of Layer 2s that use optimistic compositions. Zero-Knowledge Rollups: Zero-knowledge, or “ZK,” rollups check every single transaction for validity before submitting it to the blockchain. These types of hashes use sophisticated cryptography and mathematics known as “zero-knowledge proofs” to verify that each transaction is legitimate. Among decentralization and security purists, ZK hashes are the preferred Ethereum scaling mechanism. However, they are much more complicated than optimistic summaries and have not yet enjoyed such wide adoption. StarkEx and zkSync are examples of Layer 2s that use zero-knowledge summaries.
To sum it up
Ethereum is seeing tons of demand and Layer 2s are here to help scale the blockchain and make it accessible to everyone. While the technologies are still in their infancy, Layer 2s like Polygon and Arbitrum are already seeing wide adoption, while ZK-based Layer 2s like StarkEx and zkSync promise cheaper transactions with no impact on security.
Frequently Asked Questions
L2 tokens are the platform tokens for Layer 2 blockchains such as Polygon, Arbitrum and Optimism.
L2 tokens trade just like any other cryptocurrency token, meaning they can go up or down in price.
L2 fees are generally much lower than the fees on Ethereum Mainnet. For example, the average fee on Polygon is $0.018 per transaction, compared to $5+ on Ethereum.
It is difficult to say that any single L2 is the best. It really depends on what you are looking for. For wide adoption and fast transactions, L2s like Polygon and Arbitrum are good choices.
If security and decentralization are very important to you, zero-knowledge summaries like StarkEx and zkSync can be good choices.
Contributor
George is a technology writer interested in web3 startups and communities. In the dynamic world of crypto, he stays tuned to the daily headlines, deep dives and industry commentary.
Managing Editor
Managing editor works to make crypto easier to understand. Pair editorial integrity with crypto-curiosity for content that makes readers feel like they finally “get it.”
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