Plain English
A Layer 2 is a separate execution environment that processes transactions off the main L1 but settles back to it for security. Arbitrum, Optimism, Base, zkSync, and Linea are Ethereum L2s. They cut fees by 10–100x compared to mainnet while still inheriting Ethereum’s security guarantees.
How it actually works
The dominant L2 design is the rollup: batch hundreds of transactions off-chain, post a compressed proof or data summary back to L1. Optimistic rollups (Arbitrum, Optimism) assume batches are valid unless challenged within a 7-day window. ZK rollups (zkSync, StarkNet) post mathematical validity proofs immediately. Both inherit L1 finality once their state is anchored.
What it means for you
L2s are where most active DeFi and consumer crypto activity now lives. For HNW positioning, the L2 universe is the primary deployment ground for size — fees are reasonable, ecosystems are mature, and liquidity is deep on Arbitrum, Base, and Optimism. Bridge selection and L2 token exposure are the two main decisions; both warrant deliberate strategy, not defaults.
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Educational content only. Not investment, tax, or legal advice.