Layer 2 in crypto means a network or system built on top of a base blockchain. The base chain is often called Layer 1, while Layer 2 handles activity in a way that can be faster or cheaper.
Why Layer 2 exists
Popular blockchains can become slow or expensive when too many people use them. Layer 2 networks reduce pressure by processing transactions separately and settling results back to the main chain.
Examples and tradeoffs
Ethereum has many Layer 2 systems. Polygon also became well known for Ethereum scaling, though its ecosystem includes multiple products and token changes over time.
Layer 2 can improve user experience, but users should understand bridging, fees, security assumptions, and which network their assets are actually on.