As users on Ethereum multiply, the network faces high gas fees and slow transactions. The leading technology engineered to solve this scaling bottleneck is “Layer 2” (L2). We examine L2 networks like Arbitrum and Optimism and check how they cut fees.

Ethereum’s Scaling Bottleneck

Prioritizing decentralized security, Ethereum’s base layer (L1) processes limited transactions per block, causing gas fees to spike to tens of dollars during high traffic.

The Layer 2 Architecture

L2 networks process transaction logs off the Ethereum main chain, roll them up into batches, and post only compressed proofs back to L1 (via Rollup technology).

• Drastic Fee Reductions: Bundling transactions divides the cost of L1 settlement, cutting fees by 90% to 99%.
• Instant Processing: Provides immediate transaction feedback while utilizing the security guarantees of the base Ethereum ledger.

Leading L2 Ecosystems

• Arbitrum: The TVL (Total Value Locked) champion for DeFi integrations among L2s.
• Optimism: Promotes the modular OP Stack codebase, powering Layer 2 setups like Coinbase’s Base chain.