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L1 vs L2 Networks

When working with stablecoins, you’ll often hear about “Layer 1” and “Layer 2” networks. These terms refer to the underlying blockchain infrastructure—and they can impact everything from transaction speed and cost to which wallets and integrations you’ll need.

Understanding the difference between L1 and L2 networks helps you make informed choices about where and how to send stablecoin payments.

What is a layer 1 (L1) network?​

A Layer 1 network is the base blockchain protocol. Ethereum, Solana, Avalanche, and Bitcoin are all examples of L1s. These networks handle all transaction validation, settlement, and security at the base level.

When you send USDC on Ethereum, for example, the transaction is processed directly by the Ethereum network. That gives you high security and broad compatibility—but often at the cost of slower speeds and higher gas fees, especially during peak usage.

For stablecoin payments, L1s are seen as reliable and widely supported, but they may not be the most efficient option if speed or cost is a major concern.

What is a layer 2 (L2) network?​

Layer 2 networks are built on top of Layer 1 networks to improve performance. They handle transactions off-chain or in batches, and then settle the results back to the main blockchain. Popular L2s include Arbitrum, Optimism, and Base (all built on Ethereum).

The main benefit of L2s is lower transaction costs and faster speeds. You still get the security of the underlying L1 (since final settlement happens there), but with much better performance for everyday activity like sending stablecoin payments or interacting with smart contracts.

For example, sending USDC on Arbitrum often costs just a few cents and confirms in seconds, compared to several dollars and longer wait times on Ethereum L1.

Why this matters for stablecoins​

Most major stablecoins exist on both L1 and L2 networks, but they are not interchangeable across chains. USDC on Ethereum is not the same as USDC on Arbitrum, even if the value is equal. You need to:

  • Use a wallet that supports the correct network
  • Send to a recipient using the same chain
  • Pay network fees in the right native token (e.g., ETH for Ethereum, ARB for Arbitrum)

If you’re integrating stablecoin payments into your platform, you’ll also want to decide which networks to support based on your users’ needs. For example, L2s are often better for microtransactions or frequent payouts, while L1s may be preferred for storing value or working with more conservative partners.

Final thoughts​

Think of L1 networks as the foundation—and L2s as the fast lanes built on top. Both have their place in stablecoin payments. If you’re just starting out, your wallet or provider will usually guide you through selecting the right network. But as you scale, especially in business or development contexts, knowing the difference helps you optimize for cost, speed, and user experience.

Next up:​

  • Chains with Stablecoins – Explore which blockchains support stablecoin activity
  • Comparing Network Fees – See how costs vary between networks and what to expect per transaction