Finance glossary
Layer 2
Definition
A blockchain network built on top of another to process transactions faster and more cheaply.
A Layer 2 solution processes transactions off the main blockchain, or Layer 1, then settles the results back onto it in batches. This reduces congestion and fees on the base network while inheriting much of its security. Rollups and sidechains are common examples built to scale networks like Ethereum.
In a sentence
Gas fees dropped sharply once the app moved its transactions to a Layer 2 network.
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