TL;DR: A Layer 2 (L2) blockchain is a separate network that operates on top of a Layer 1 chain like Ethereum, inheriting its security while dramatically improving scalability. L1 networks have limited capacity (Ethereum processes roughly 30 transactions per second), so L2s execute transactions off the main chain and periodically settle compressed results back to L1. This architecture delivers 10-100x greater throughput and significantly lower fees. The most prevalent type of L2 is the rollup, including optimistic rollups (Arbitrum, Optimism, Base) and zero-knowledge rollups (zkSync, StarkNet). Layer 2 scaling has become the dominant strategy for expanding blockchain capacity without sacrificing the security and decentralization of the base layer.
The Simple Explanation
Think of a Layer 1 blockchain like a courthouse. Every official record gets filed there, and the courthouse guarantees the records are authentic and permanent. But the courthouse has limited capacity. It can only process so many filings per day, and during busy periods, the wait time and filing fees become unreasonable.
A Layer 2 is like a law office that operates outside the courthouse but files its final records there. The law office processes hundreds of cases per day (much faster than the courthouse), prepares all the paperwork, and periodically delivers a compressed summary of its completed work to the courthouse for official recording. The courthouse verifies the summary is correct and stamps it as official. The law office handles the volume; the courthouse provides the authority.
In blockchain terms, the L2 processes transactions quickly and cheaply on its own network. Periodically, it compresses hundreds or thousands of those transactions into a single batch and posts it to the L1, where it is verified and stored permanently. Users get fast, cheap transactions on the L2 while their data is ultimately secured by the L1's full validator set.
