Layer 2 networks make transactions cheaper by changing the location and density of where computation happens.
If we think of Ethereum (Layer 1) as a busy highway where every car pays a high tax, a Layer 2 is like a giant bus. It collects hundreds of passengers (transactions), drives them down the highway, and splits the single high tax among everyone on board.
1. The Rollup Mechanism
L2s use a technology called Rollups. They "roll up" hundreds of transactions into a single batch.
Execution (Off-chain): The actual computation (e.g., token swap) happens on the L2's own servers. This is very cheap because it doesn't require thousands of global nodes to agree simultaneously.
Settlement (On-chain): Instead of sending every detail to Ethereum, the L2 sends only a highly compressed summary of all those transactions.
2. How the Fee is Calculated on L2
On a Layer 2, the fee consists of two parts:
A. The L2 Execution Fee
This is the cost of running the transaction on the L2's own network.
- Cost: Extremely low (fractions of a cent).
- Why: L2s are designed for high throughput and don't have the massive decentralization overhead of Ethereum.
B. The L1 Security Fee
This is the most expensive part. To stay secure, the L2 must post its transaction data back to Ethereum Layer 1 so that anyone can verify the state.
- Cost: This depends on the current gas price of Ethereum.
- Efficiency: Because the data for 500 transactions is compressed into one "blob" or batch, you only pay for 1/500th of the Ethereum block space.
3. The "Blob" Revolution (EIP-4844)
In 2024, Ethereum introduced "Blobs" (Binary Large Objects). Before this, L2s had to store their data in a part of the Ethereum block called calldata, which was very expensive.
- Blobs are like "sidecars" attached to a block. They are temporary and deleted after about 18 days.
- Because they don't stay on the blockchain forever, Ethereum charges a significantly lower fee for Blobs.
- This update dropped L2 fees by 90% or more, making transactions cost as little as $0.01.
4. Security
The risk with L2s is Centralization. Most L2s currently use a "Sequencer" (a single server) to order transactions. If that server goes down, the network pauses.
5. Summary
From a systems perspective, L2s move the State Transition logic off-chain and only use Layer 1 as a Data Availability layer. By treating the most expensive resource (Ethereum block space) as a shared cost through compression and blobs, they achieve a 10x–100x reduction in fees without sacrificing the underlying security of the Ethereum mainnet.
Top comments (0)