Have you ever wondered what the buzz is about when people mention “Layer 2” or “L2” in the crypto space? It's not as complicated as it sounds. Let's dive in and demystify what a “Layer 2” blockchain is and how it differs from a “Layer 1” blockchain.

Layer 2 blockchains are considered scaling solutions built on top of a Layer 1 blockchain. They are designed to solve the blockchain trilemma. Although Layer 2 blockchains operate separately from Layer 1 blockchains, they are designed to inherit its security guarantees. 

Ethereum and Bitcoin are the most well-known Layer 1 blockchains today. They act as the foundation on which Layer 2 blockchains are built. These solutions can speed up transaction processing while ensuring that costs on Layer 1 remain low. In the case of Arbitrum, our products are designed to scale the Ethereum blockchain. 

The different types of layer 2s 

Not all Layer 2s are built the same, but they most commonly come as either a blockchain rollup or an AnyTrust chain. 

Breaking down blockchain rollups

The purpose of rollups is to reduce the computation load of the Layer 1 blockchain and increase transaction throughput. Rollups are designed to process transactions “offchain” separately from the Layer 1 blockchain. These transactions are rolled up into batches and submitted onto the Layer 1 blockchain as one data piece. The Layer 1 blockchain will then add the data to its “block” and confirm it. 

There are two predominant rollups in the blockchain technology space today: optimistic rollups and zero-knowledge (zk) rollups. The Arbitrum Rollup, our flagship product that has been implemented by Arbitrum One, is an optimistic rollup focused on minimizing trust assumptions and scaling Ethereum.

Optimistic rollups

Optimistic rollups assume that all bundled transactions are valid by default unless proven otherwise, thus being “optimistic.” This type of rollup uses fraud-proof mechanisms and a challenging period to ensure the validity of each transaction. 

When it comes to withdrawing funds, users will have to wait a few days (usually around one week on Arbitrum One) or pay a small fee before they can access their funds from the rollup.

Zero knowledge rollups

Unlike optimistic rollups, zk rollups rely on a mathematical proof mechanism that verifies that a piece of information is accurate without revealing its contents. Once the information is proven to be accurate, the rollup will submit validity proofs via smart contracts to the parent blockchain, verifying the transaction.

It is important to note that zk rollups are still in their infancy and are difficult to implement while remaining decentralized.

AnyTrust

An AnyTrust chain is a Layer 2 chain within the Arbitrum ecosystem to improve scalability while maintaining data availability guarantees. 

These blockchains can finalize and settle transactions without the main chain, making them much faster and more affordable. However, they introduce additional trust assumptions and are often more suited to projects building social networks or gaming products. 

Unlike traditional Arbitrum rollups, which rely on Ethereum’s Layer 1 (L1) to post all transaction data in compressed form, AnyTrust chains offload this data availability responsibility to an external Data Availability Committee (DAC). This approach significantly reduces costs while still ensuring that data remains accessible when needed.