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.
- Checked against the rules: Oct 2026
- Sources cited · No buy or sell calls
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
| Base | Arbitrum | Optimism | |
|---|---|---|---|
| Built by | Coinbase | Offchain Labs | Optimism Foundation |
| Fee token | ETH | ETH | ETH |
| Known for | Consumer apps, social, memecoins | DeFi | The 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
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