Understanding Layer 2

A Layer 2 is a second network or blockchain built on top of the Layer 1 Ethereum blockchain while preserving the security and decentralization guarantees of Ethereum. It aims to increase the scalability of the Ethereum blockchain by allowing more transactions to occur off-chain, rather than on the blockchain itself. This can help to reduce the cost and time associated with processing transactions on the Ethereum network.

The USDFI protocol is currently considering to launch on two Layer 2 networks: Optimism and Arbitrum. These networks use a technology called "optimistic rollups" to increase scalability. This technology allows many transactions from different users to be bundled together and processed as a single transaction on the Ethereum blockchain. This can lead to lower transaction fees and faster confirmation times for users.

To use one of these Layer 2 networks, you will first need to deposit funds from your Layer 1 wallet to the Layer 2 network. This is an important step as it ensures that your funds are stored securely on the Ethereum blockchain while still being able to take advantage of the benefits offered by the Layer 2 network.

It's important to note that both Optimistic Ethereum and Arbitrum are still in beta release and generally should be used with caution. There is a real possibility that errors can occur on a Layer 2 network which may result in a total loss of funds. Therefore, it is important to understand the risks associated with using a Layer 2 network before depositing any assets.