Layer 2 scaling refers to protocols built on top of a base blockchain that process or aggregate transactions with less direct Layer 1 work while relying on the base chain for specified security, settlement, data, or dispute functions.
Layer 2 designs include payment channels, rollups, and other off-chain or partially on-chain protocols. They can reduce fees or increase throughput by executing activity away from the base chain and posting compressed data, proofs, commitments, or dispute information back to Layer 1. The degree of reliance on Layer 1 varies by architecture, so Layer 2 should not be treated as one uniform security model.
Layer 2 changes where transaction processing occurs while retaining a defined relationship with the base chain. An independent blockchain connected only through a bridge remains a separate chain; bridge connectivity alone does not make it a Layer 2.
Layer 2 networks can materially lower the cost of stablecoin payments while adding new assumptions around sequencers, bridges, proofs, data availability, and withdrawals.
A rollup can execute many stablecoin transfers off the base execution layer and publish compressed transaction data or proofs to Layer 1.