Layer 2s in Practice: Arbitrum, Optimism, Base, Polygon Compared

What Are Layer 2s and Why Use Them?

Layer 2 solutions process transactions off Ethereum mainnet, then batch them back for final settlement. Result: same security guarantees, 10-100x lower fees.

Example cost comparison (as of early 2024):

• Ethereum mainnet swap: $5-$50 (varies with congestion)
• Arbitrum swap: $0.10-$0.50
• Optimism swap: $0.15-$0.60
• Base swap: $0.05-$0.30
• Polygon swap: $0.01-$0.05

Arbitrum

Overview

Arbitrum is an Optimistic Rollup that launched in 2021. It's the largest L2 by total value locked (TVL) and number of applications.

Key Features

• Largest DeFi ecosystem: Most protocols available (Uniswap, Aave, GMX, etc.)
• Optimistic rollup: Uses fraud proofs, transactions are final after ~7 days unless challenged
• EVM-compatible: Works with existing Ethereum tools (MetaMask, Etherscan-style explorers)
• Multiple chains: Arbitrum One (main) and Arbitrum Nova (data availability off-chain)

Costs

Transaction fees: Typically $0.10-$0.50, depending on complexity and network activity. Bridge fees: Free to bridge from Ethereum mainnet (you pay mainnet gas). Withdrawal back to mainnet: ~7 days (fraud challenge period) or use third-party bridges for faster (but more expensive) withdrawals.

When to Use

• You want the largest ecosystem of DeFi apps
• You need protocols not available on other L2s
• You're doing complex DeFi strategies requiring multiple protocols

Optimism

Overview

Optimism is also an Optimistic Rollup, launched in 2021. It has strong DeFi support and focuses on public goods funding.

Key Features

• Strong DeFi ecosystem: Major protocols available (Uniswap, Aave, Synthetix, etc.)
• Optimistic rollup: Similar security model to Arbitrum
• RetroPGF: Funds public goods through retroactive grants
• Superchain vision: Plans for multiple interoperable chains

Costs

Transaction fees: Typically $0.15-$0.60. Bridge fees: Free from mainnet. Withdrawal: ~7 days (fraud challenge period) or use fast bridges.

When to Use

• You prefer protocols that align with Optimism's ecosystem
• You're building or using projects funded by RetroPGF
• You want strong DeFi options without needing the absolute largest ecosystem

Base

Overview

Base is Coinbase's Optimistic Rollup, launched in 2023. It's built on Optimism's technology stack and has grown rapidly.

Key Features

• Coinbase integration: Easy on-ramp from Coinbase exchange
• Fast-growing ecosystem: Many new protocols launching
• Lowest fees among major L2s: Often $0.05-$0.30 per transaction
• Optimistic rollup: Same security model as Arbitrum/Optimism

Costs

Transaction fees: Lowest of the four, typically $0.05-$0.30. Bridge fees: Free from mainnet. Withdrawal: ~7 days or use fast bridges.

When to Use

• You have a Coinbase account (easy on-ramp)
• You want the lowest fees
• You're exploring newer protocols
• You don't need the absolute largest ecosystem (yet)

Polygon

Overview

Polygon is technically a sidechain (not a rollup), though it has rollup variants. It's been around since 2020 and focuses on low costs and high throughput.

Key Features

• Very low fees: Often $0.01-$0.05 per transaction
• Fast transactions: Near-instant finality
• Large ecosystem: Many DeFi protocols and NFT marketplaces
• Sidechain model: Doesn't inherit Ethereum security (relies on Polygon validators)

Costs

Transaction fees: Lowest of all four, typically $0.01-$0.05. Bridge fees: Small fee when bridging. Withdrawal: Faster than rollups (no fraud challenge period).

When to Use

• You need the absolute lowest fees
• You're doing high-volume transactions (NFT minting, gaming, etc.)
• You're comfortable with sidechain security model (less decentralized than rollups)

Security Comparison

Optimistic Rollups (Arbitrum, Optimism, Base)

Security: Transactions are assumed valid unless proven fraudulent during the challenge period (~7 days). If you're withdrawing funds, you may wait 7 days unless using a fast bridge (which takes on risk).

Decentralization: Moderate. Sequencers (who order transactions) are centralized but can be challenged. Security relies on Ethereum validators.

Sidechain (Polygon)

Security: Relies on Polygon's validator set (separate from Ethereum). Less decentralized than rollups but faster and cheaper. Withdrawals are instant (no challenge period).

Decentralization: Lower than rollups. Validators are controlled by Polygon, though the set is permissionless.

Real-World Example: Choosing an L2

Scenario: You want to swap $1,000 worth of ETH for USDC and deposit it in a lending protocol to earn interest.

Option 1: Arbitrum

• Fees: Swap ~$0.30, Approve ~$0.10, Deposit ~$0.20 = ~$0.60 total
• Options: Largest selection of lending protocols
• Best if: You want maximum options and don't mind slightly higher fees

Option 2: Base

• Fees: Swap ~$0.15, Approve ~$0.05, Deposit ~$0.10 = ~$0.30 total
• Options: Good selection, growing ecosystem
• Best if: You want lower fees and Coinbase integration

Option 3: Polygon

• Fees: Swap ~$0.02, Approve ~$0.01, Deposit ~$0.02 = ~$0.05 total
• Options: Good selection of protocols
• Best if: You prioritize lowest cost and are comfortable with sidechain security

How to Get Started

1. Choose an L2 based on your priorities (ecosystem size, fees, security model)
2. Bridge assets from Ethereum mainnet (or deposit directly if using Coinbase for Base)
3. Add the network to MetaMask (official bridge sites provide network details)
4. Start using DeFi protocols on the L2

Most major DeFi protocols (Uniswap, Aave, etc.) are available on multiple L2s. You can move between L2s using bridges, though each bridge has fees.

Future Considerations

All L2s are evolving:

• EIP-4844 (Proto-Danksharding) reduces L2 data costs, making fees even lower
• Full Danksharding will further reduce costs
• L2 interoperability is improving (easier to move between chains)
• Some L2s are exploring different security models (zkEVMs for example)