Layers describe how blockchains are stacked on top of each other. A layer 1 is a main network, a layer 2 runs on top of one to make it cheaper, and a layer 3 sits on top of a layer 2. This article explains the differences and shows how the seven chains on ChainMonitor fit.
If you are new to the basics, start with what is a blockchain first.
Layer 1: the base networks
A layer 1 (L1) is a blockchain that runs on its own. It has its own validators or miners, its own coin, and it decides by itself which transactions are final. Nothing else needs to confirm its blocks.
ChainMonitor shows three L1s:
- Bitcoin is the oldest. It focuses on being digital money and uses proof of work. See the Bitcoin guide.
- Ethereum supports smart contracts and uses proof of stake. See the Ethereum guide.
- Solana is built for high speed, with slots of about 400 milliseconds. See the Solana guide.
Why layer 2 networks exist
Every blockchain has limited block space. Only so many transactions fit in each block. When many people want to transact, they compete by offering higher fees. On Ethereum, the most used smart contract network, this made fees high during busy periods.
You could make blocks bigger, but then fewer people could run a node, because the hardware and bandwidth needs grow. Smaller node counts weaken the idea of a network that anyone can check. This tension is often called the scaling problem.
Layer 2 (L2) networks are the answer Ethereum chose. Instead of every transaction being processed by every Ethereum node, an L2 processes transactions itself and sends a compact summary back to Ethereum. Ethereum is used as a court of record, not as the place where every swap happens.
How an L2 inherits security
The key idea is that an L2 posts its transaction data to the L1. Because the data is public on Ethereum, anyone can rebuild the L2 state from it. If the L2 operator tried to cheat, the evidence is available, and the rules of the L2 let users prove the fraud or block it.
So the L2 does not need its own large set of validators to protect your funds. It borrows the security of Ethereum. Your assets on the L2 are controlled by smart contracts on Ethereum, and withdrawing back to Ethereum is governed by those contracts.
Different L2s implement this in different ways. The two main designs, optimistic and zero-knowledge rollups, are explained in rollups: optimistic vs zk.
Rollups and sidechains are not the same
People often call every network next to Ethereum a "layer 2". The word is used loosely, so it helps to separate two things.
Rollup. A rollup posts its transaction data to the L1 and relies on the L1 to settle disputes. This is what gives it inherited security. Arbitrum One, Base and OP Mainnet are rollups.
Sidechain. A sidechain is a separate blockchain with its own validators that is connected to another chain by a bridge. It does not rely on Ethereum to check its blocks. If its validators misbehave, Ethereum cannot step in. Polygon PoS is of this type. It periodically records checkpoints on Ethereum, but it is not a rollup, and its security depends on its own validator set.
Neither design is automatically bad. Sidechains can be cheap and fast, and they trade off the inherited security that rollups provide. For funds you cannot afford to lose, understanding which type you use matters. See bridges and their risks for what moving between them involves.
What people mean by layer 3
A layer 3 (L3) is a chain that settles on a layer 2 instead of on Ethereum directly. The usual picture is a stack: an app chain runs on an L2, and that L2 runs on Ethereum.
Why build one? A team may want its own chain with a custom gas token, special rules, or a block space reserved for its own app, such as a game. Toolkits like Arbitrum Orbit and the OP Stack make it possible to launch such chains. Some are built to settle on an L2, which makes them L3s.
The term is not strictly defined. Some projects use it for app-specific chains; others use it for anything above an L2. Treat it as a description of where a chain settles, and check each project's own documentation. ChainMonitor does not currently show an L3.
The seven chains compared
| Chain | Layer | Type | Gas token |
|---|---|---|---|
| Bitcoin | L1 | Proof of work | BTC |
| Ethereum | L1 | Proof of stake | ETH |
| Solana | L1 | Proof of stake | SOL |
| Arbitrum One | L2 | Optimistic rollup | ETH |
| Base | L2 | Optimistic rollup (OP Stack) | ETH |
| OP Mainnet (Optimism) | L2 | Optimistic rollup (OP Stack) | ETH |
| Polygon PoS | Separate chain | Sidechain | POL |
POL is the gas token of Polygon PoS, and was formerly called MATIC. Notice that the three rollups all use ETH for gas, so one balance of ETH can pay fees on all of them. See the Arbitrum, Base, Optimism and Polygon guides for details on each.
Trade-offs to keep in mind
- Cost. L2s are normally much cheaper than Ethereum, but they still pay for posting data to the L1. Check the live prices on the gas tracker.
- Speed. An L2 can confirm a transaction on its own quickly, but full finality on Ethereum comes later.
- Withdrawals. Moving funds from an optimistic rollup back to Ethereum through the official bridge takes about 7 days.
- Trust. Today most rollups rely on a sequencer, a server that orders transactions. This is a point of centralization that you should know about.
- Fragmentation. Your funds live on one chain at a time, and moving between them takes steps.
- Different addresses. Ethereum, the L2s and Polygon share the same address format. Bitcoin and Solana do not. See wallets and keys.
To understand why fees differ so much, read why fees differ between chains.
Frequently asked questions
What is the difference between layer 1 and layer 2?
A layer 1 is an independent blockchain that confirms its own blocks. A layer 2 runs on top of a layer 1, processes transactions cheaply, and posts data back to the L1 so it can inherit the L1's security.
Is Polygon a layer 2?
Polygon PoS is often called one, but it is technically a sidechain, not a rollup. It has its own validators and records checkpoints on Ethereum. Its security does not come from Ethereum in the way a rollup's does.
Are Base and Optimism the same?
They are separate chains that use the same open software, the OP Stack. Base was built by Coinbase. OP Mainnet is the original chain of the Optimism ecosystem. Both are optimistic rollups that settle on Ethereum.
Why is layer 2 cheaper than Ethereum?
Many L2 transactions are bundled together and share the cost of one post to Ethereum. Each user pays a small part of that cost plus a small fee for the L2's own processing.
What is a layer 3?
A layer 3 is a chain that settles on a layer 2 instead of on Ethereum directly. It is usually an app-specific chain, built with a toolkit such as Arbitrum Orbit or the OP Stack.