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Layer 2s explained: Base, Arbitrum, Optimism and why fees are lower

What layer 2 networks are, how they make Ethereum cheaper, how Base, Arbitrum and Optimism differ, their risks, and how to use them from India.

The problem they solve

Ethereum's main network is secure but can be expensive when busy. Layer 2s (L2s) run transactions on a separate network, then post compressed proofs or data back to Ethereum. You get much lower fees while still settling on Ethereum.

The big three

BaseArbitrumOptimism
Built byCoinbaseOffchain LabsOptimism Foundation
Fee tokenETHETHETH
Known forConsumer apps, social, memecoinsDeFiThe OP Stack used by other chains

All three are "optimistic rollups": transactions are assumed valid unless challenged, which is why withdrawals to Ethereum through the official bridge can take about a week.

How to use them from India

  • Many Indian exchanges let you withdraw directly on Base or Arbitrum. That's usually the easiest route.
  • Otherwise, bridge from Ethereum.
  • Keep a little ETH on the L2 for fees.

Risks

  • Upgrade keys: teams can still change contracts on most L2s.
  • Sequencers: one operator usually orders transactions; outages can pause the network.
  • Bridges: bridging adds risk. Check networks before sending.

Tax

Using an L2 doesn't change tax: swaps and sales are taxable transfers. Moving your own funds between networks isn't clearly a sale, but the law doesn't address bridging directly. Bridging and tax.

Sources

  • layer 2
  • ethereum
  • basics

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