Layer 2
Definition
Layer 2 refers to scaling solutions built on top of existing blockchains (Layer 1) to improve transaction speed and reduce costs. They process transactions off the main chain while inheriting its security. Key types include Optimistic Rollups (Optimism, Arbitrum), ZK-Rollups (zkSync, StarkNet), and Sidechains (Polygon PoS). Layer 2s have dramatically reduced Ethereum transaction costs from $20-50 to under $0.10, enabling mass adoption of DeFi and gaming.
Why Does This Matter?
Understanding Layer 2 is essential for anyone investing in cryptocurrencies or working with blockchain technology. This concept directly influences how projects are valued, how markets behave, and what risks and opportunities exist for investors.
How Does CryptoValue Use This?
At CryptoValue, fundamental concepts like Layer 2 feed into our proprietary Value Score — a rating from 0 to 100 based on 10 on-chain and market metrics. Our goal is to help you identify undervalued and overvalued coins, rather than just looking at price.