Layer 2 (L2)
A secondary network built on top of a Layer 1 blockchain to increase speed and reduce transaction costs. Examples: Base, Arbitrum, Optimism.
Layer 2 networks process transactions off the main chain but settle them back to the Layer 1 for security. Think of it like an express lane on a highway. You still end up at the same destination (Ethereum's security), but you get there faster and cheaper.
For USDC users, L2s are a game-changer. Sending USDC on Ethereum might cost $1-10 in gas. The same transfer on Base costs less than a penny. The USDC is the same token, backed by the same reserves. The only difference is the network you're using.
Base (built by Coinbase), Arbitrum, and Optimism are the most popular L2s for USDC.
Related Terms
Layer 1 (L1)
The base blockchain network that processes and finalizes transactions on its own. Examples: Ethereum, Solana, Avalanche.
Blockchain
A distributed, immutable digital ledger that records transactions across a network of computers.
Gas Fees
Transaction fees paid to blockchain validators for processing and confirming transactions.
Bridging
Moving cryptocurrency from one blockchain to another. For example, moving USDC from Ethereum to Base.
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This definition is provided for educational purposes. USDC.org is an independent resource and is not affiliated with Circle Internet Financial.