Ethereum Layer 2 networks process transactions separately from Ethereum's main chain, then settle the results back to it, allowing far cheaper and faster transactions while still relying on Ethereum's underlying security. They exist to solve the capacity limits of \[pillar hyperlink: What Is Ethereum\] operating alone.
Why L2s exist
Ethereum's base layer can only process a limited number of transactions per block, which pushes fees higher during busy periods. See What Is Gas on Ethereum for how that plays out directly. Layer 2 networks were built specifically to relieve that bottleneck.
Rollups
Most major Layer 2 networks use a technique called rollups, which bundle many transactions together off the main chain and post a compressed summary back to Ethereum, inheriting much of its security while dramatically cutting costs.
Major L2s
Arbitrum and Optimism are among the most widely used Ethereum rollups, each hosting a large share of DeFi and app activity that would otherwise run more expensively on the base layer.
Trade-offs
Layer 2s are generally faster and cheaper, but they add some complexity: moving funds between layers takes an extra step, and each L2 has its own trust and security nuances worth understanding before relying on it heavily.