$BTC First: What is Layer 2?

• Layer 2 is a technical solution built on top of the underlying blockchain network (referred to as Layer 1, such as Ethereum, Bitcoin, etc.).

• Its goal: to improve transaction speed, reduce fees, and increase scalability without sacrificing the security of the underlying network.

• For example: instead of recording every transaction directly on the underlying blockchain (which can be slow and costly at times), transactions are executed on Layer 2, then aggregated and ultimately recorded on Layer 1.

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The most popular types of Layer 2 solutions:

1. Rollups (such as Optimistic Rollups, ZK-Rollups)

2. State Channels

3. Plasma

4. Sidechains

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Famous Layer 2 tokens:

• OP (Optimism)

• The token of the Optimism network, which is a Layer 2 solution built on Ethereum using Optimistic Rollup technology.

• ARB (Arbitrum)

• The token of the Arbitrum network, also a popular Layer 2 solution based on Optimistic Rollups technology.

• MATIC (Polygon)

• The token of the Polygon network, which is a Layer 2 / Sidechain for Ethereum, improving fee speed and scalability.

• ZKS (zkSync)

• The token of the zkSync network, using ZK-Rollups as a Layer 2 solution.

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Why is Layer 2 important?

• It relieves pressure from the underlying network

• It reduces transaction costs

• It significantly improves transaction speed