// GLOSSARY -- BLOCKCHAIN & CRYPTO FUNDAMENTALS

What is Layer 2 (L2)?

1 min read Updated

A Layer 2 (L2) is a scaling solution built on a Layer 1 blockchain that processes transactions off-chain while inheriting L1 security — dramatically increasing throughput and reducing costs.

WHY IT MATTERS

L2s exist because L1 blockchains can't handle global-scale volume alone. Ethereum does ~15 TPS on L1. L2 rollups like Base, Arbitrum, and Optimism process thousands at fractions of the cost.

The dominant approach is rollups: optimistic rollups (assume valid, allow fraud proofs) and ZK rollups (prove validity mathematically). Both inherit Ethereum's security.

L2s are where most new activity happens. Lower fees enable micropayments, gaming, social apps, and high-frequency DeFi that L1 costs preclude.

HOW POLICYLAYER USES THIS

PolicyLayer deploys on L2 networks — specifically Base — where low gas costs make per-transaction policy enforcement economically viable. Checking every agent transaction costs fractions of a cent on L2 vs dollars on L1.

FREQUENTLY ASKED QUESTIONS

Optimistic vs ZK rollups?
Optimistic: assume validity, allow challenge period (~7 day withdrawal delay). ZK: prove validity cryptographically upfront (faster finality but more complex technology).
Which L2 should I build on?
Base (Coinbase-backed, growing fast), Arbitrum (largest TVL), or Optimism (OP Stack ecosystem). Evaluate throughput, cost, finality, and developer tooling.
Are L2s as secure as L1?
Rollups inherit L1 security for transaction validity. However, sequencer centralization and bridge risks introduce additional trust assumptions.

FURTHER READING

Enforce policies on every tool call

Intercept is the open-source MCP proxy that enforces YAML policies on AI agent tool calls. No code changes needed.

npx -y @policylayer/intercept
github.com/policylayer/intercept →
// GET IN TOUCH

Have a question or want to learn more? Send us a message.

Message sent.

We'll get back to you soon.