What is a layer 2

A layer 2 is a network that does its busy work away from a base chain, then posts a record of that work back to the base chain. Ethereum is the base chain people usually mean. The layer 2 batches many payments into one update on Ethereum, so each payment costs less than it would have cost alone on the main chain. The security claim is that the main chain can still check the batch, or that the data needed to check it is sitting there.

A rollup is the common shape. Transactions happen on the layer 2. A batch is posted to Ethereum. An optimistic rollup assumes the batch is honest unless someone challenges it during a window. A validity rollup posts a proof that the batch followed the rules. The difference matters when something goes wrong. One waits on a challenge period. The other relies on the proof. A reader does not have to pick a favorite to see that they are not the same exit.

Robinhood Chain is a layer 2 in this sense, an Ethereum rollup the company has used for stock tokens. A token that trades there is not trading on Ethereum itself, and it is not trading on Nasdaq. It is trading on Robinhood's chain, with Ethereum underneath the settlement story the company tells. The stock-token exploration with T. Rowe Price sits on that chain. The news is here: https://cryptokeymedia.com/news/robinhood-trowe-active-etf

A sidechain is the cousin that does not make the same promise. It has its own validators and its own rules, and a bridge connects it to the main chain. If the sidechain's validators fail, the main chain does not rescue the payments. People still call sidechains layer 2. The stricter use of the term is the rollup that posts its data, or its proof, home. The bridge is the tell. A network you can only leave through a bridge is not settling on the chain you think it is, unless the rollup's own exit is the bridge.

Fees are why the networks exist. A swap or a transfer on Ethereum can cost more than the payment is worth when the chain is busy. The layer 2 charges a smaller fee and pays Ethereum once for the batch. The user pays the layer 2. The layer 2 pays Ethereum. Both numbers are real. A screenshot of a cheap fee is the first number. It leaves out the rent the batch still owes the base chain.

Moving coins onto a layer 2 is a bridge, even when the network calls it a deposit. The coins are locked on Ethereum and a credit appears on the layer 2. Coming back is a withdrawal. On an optimistic rollup the withdrawal can take days, because of the challenge window, unless a service advances the money for a fee. Instant, on those networks, means someone else took the wait. It does not mean the protocol finished.

A layer 2 is not a new coin by itself, though many of them have one. The network can be used without buying the token, and the token can trade without the holder ever using the network. Solana is not a layer 2. It is its own base chain. Sui is its own base chain. Calling every fast chain a layer 2 flattens a difference that decides where a payment actually settles.

What comes next is the exit, not the fee. A layer 2 is cheap because it batches. It is still tied to a base chain if, and only if, the batch and the withdrawal end there. Robinhood Chain's stock tokens are one desk example. The test for the next one is the same. Where does a withdrawal land, and how long does the protocol, not a middleman, take to finish it.