A Layer-2 blockchain is a chain that relies on Ethereum(a layer-1 blockchain), to finalize its transactions. They can process transactions like any other chain but have to submit the hash of transaction batches (blocks) to Ethereum for final approval.
Layer-2 cryptos are popular because they are lot cheaper and faster to use than Ethereum. However, they compromise on the decentralization part.
Table of Contents
1. Base
Base has emerged as the largest layer-2 blockchain due to its institutional adoption and very cheap transaction fees. Base further ensures higher adoption by using ETH to pay for gas fees. This eliminates the need of another token and the associated hassle.
#NOTE: Typically you need to pay transaction fees in native token of that blockchain, for example with POL on Polygon, ARB on Arbitrum, etc.
At present Base does roughly 6 million transactions every day and has reached a peak of 13 million transactions per day during the December bull markets.
Being integrated with Coinbase, its parent company, Base blockchain enjoys very high liquidity, tech support and developmental efforts.
However, the centralization of its blockchain (Base is owned by Coinbase) has been a point of critique.
2. Polygon
Polygon is one of the oldest Layer-2 chains starting in 2017 much before chains like Arbitrum (launched March 2023), Optimism (launched December 2021), or Shibarium (launched August 2023). Among all other chains, the Polygon ecosystem is the most diverse with two blockchains Polygon Mainnet and Polygon zkEVM (both EVM-compatible).
As recent as 2022, Polygon was the most popular Layer-2 chain before the arrival of Base and has been giving Base a tough competition.
However, its token saw a brutal crash from $1.18 to the current price of $0.22 due to the crypto winter (which also ended its Disney partnership). When altcoins resurged in 2024, Polygon saw its price rise to $0.70.
Polygon Mainnet has a DeFi TVL of $800 million approximately and $2 billion worth of stablecoins.
Polygon zkEVM on the other hand has roughly $3 million worth of TVL and negligible stablecoins.
3. Arbitrum
Arbitrum is one of the top layer-2 blockchains being used in the current market. The project uses a optimistic rollup to process transactions in batches. It processes roughly 2 million transactions per day.
The chain has approximately $2.25 billion in TVL and $2.9 billion in stablecoins, one of the highest among EVM chains.
4. Optimism
Optimism was one of the first layer-2 blockchains to use the Optimistic Rollup. The chain processes roughly a million transaction everyday and is used for general purposes.
Optimism has roughly $400 million in DeFi TVL and negligible amount of stablecoins.
5. Shiba Inu
If you are surprised to see Shiba Inu on the list of layer-2 chains, runs one of the most successful layer to but Shiba Inu runs one of the most successful blockchains called Shibarium. At present, Shibarium processes roughly 4.5 million transactions per day, higher than Polygon.
The Shibarium blockchain uses an optimistic rollup similar to Arbitrum and Optimism.
What works in favor of Shibarium, is its integration with the Shiba Inu ecosystem (currently valued at $8 billion). At its peak last year, Shiba Inu reached a valuation of $18.6 billion.
However, I feel that Shiba developers and team has not been able to exploit their popularity to the highest level. A lot more can be done on exploring new use cases like RWA, zkEVM, DeFi, and much more.
Frequently Asked Questions
What is TVL in Layer-2?
TVL or Total Value Locked shows how much of crypto is locked in various DeFi protocols on a blockchain. These cryptos can be present in liquidity pools, on-chain DeFi protocols and staking contracts.
Will Layer-2 fall out of use after Sharding in Ethereum?
Sharding is expected to raise the transaction processing in Ethereum to 100,000 TPS and make transactions super cheap. However, since Layer-2s process them in batches, they would become even more cheaper. The largest component of Layer-2 fees is the fee they pay to Layer-1 chains for finality.
Is Lightning Network a Layer-2 Chain?
No, Lightning network is a layer-2 scaling solution but it is not a blockchain.
