Funding a Wallet on Layer 2

Key Takeaways

If you’re new to crypto, all the talk about the importance of Layer 2 (or L2) must seem a bit odd, confusing really. In contrast to Layer 1, which often refers to Ethereum Mainnet, Layer 2 is a term for a specific type of Ethereum scaling solution that enables users to inherit the security of Ethereum but enjoy low transaction fees and fast block inclusion times. If you’ve ever heard of Optimism, Arbitrum, or Base, those are Layer 2 scaling solutions. Polygon is often grouped with them too (it’s really a sidechain, but let’s not worry about that here).

Every Ethereum transaction pays a fee, known as gas. Gas is priced in gwei, a tiny unit of ETH. Fees rise and fall with demand: at peak demand in 2021, a simple token swap on Mainnet could cost tens of dollars, and hyped NFT mints pushed fees far higher. Today, a typical Mainnet transaction costs well under a dollar, and the same action on a Layer 2 costs cents or less.

Because transactions on Layer 2 confirm quickly and are inexpensive to execute, many of the most innovative protocols are building on L2s. Unless you’ve been in the ecosystem for a while, however, it’s not intuitive to know how to start using Layer 2s. But there is a clear place to begin your journey into Ethereum scaling solutions: funding your wallet on Layer 2.

There are three main ways to fund an L2 wallet: moving your crypto from a centralized exchange straight to a Layer 2 network, using a third-party crypto payment service to fund an L2 wallet, or sending your digital assets from Mainnet to L2 via a bridging protocol.

Funding From CEXs

Funding your wallet directly from a centralized exchange (CEX) is perhaps the simplest way to move digital assets to an L2, particularly if you already hold cryptocurrency on the exchange. Most major CEXs offer users this option, although it isn’t always clear to the user.

On Coinbase, for example, users can send their funds directly to networks like Optimism, Polygon, or Base (Coinbase’s own Layer 2) in just a few steps:

1. Go to Coinbase.

2. Purchase or hold ETH on Coinbase.

3. Select ‘Send & Receive’, located at the top of the website.

4. Enter the amount in fiat or ETH you wish to send (you can toggle between fiat and crypto to the right of the amount), select ‘Pay with’ and choose Ethereum, and in the ‘To’ field, enter the wallet address where the funds will be sent. Select ‘Continue’.

5. On the next screen, select ‘Network’ and change the network from Ethereum to Optimism (the list also includes other Layer 2s, like Base).

6. Review, and if accurate, select ‘Send Now’.

Most major exchanges offer users the ability to send their crypto directly to an L2. Coinbase, Binance, and Kraken all support withdrawals to major Layer 2s such as Base, Optimism, and Arbitrum. Pro Tip: Always check the withdrawal network list on your exchange to see which L2s it supports before you send.

Third-Party Onramps

Another simple way to fund your L2 wallet is to take advantage of direct-to-L2 services offered by many third-party crypto payment companies. MoonPay, Ramp, and Transak are three of the most popular options to fund crypto wallets without having to use a centralized exchange.

Like most exchanges, these third-party onramps will require you to provide Know-Your-Customer information. However, once you get past those basic hurdles, these payment options are an easy way to buy crypto across the ecosystem and transfer it to Layer 2.

For MoonPay, the steps are:

1. Go to MoonPay.

2. Select ‘Buy crypto’, located at the top or middle of the website.

3. Enter the amount of fiat you wish to send and the proper denomination.

4. Select a digital asset, in this case ETH. Type in “ETH” and you will see different networks on which you can purchase ETH (you may need to scroll down); choose the Layer 2 you want to use. Click ‘Continue’.

5. Next, you will be prompted to enter personal verification and payment data.

6. Once complete, enter your Ethereum wallet address. You’ll be asked to make sure the wallet is safe to use.

7. Complete, confirm the information is correct, and select ‘Pay’.

As with CEXs, most major third-party payment onramps provide direct-to-L2 functionality. Take advantage of these innovations to save on transaction fees and increase the range of your blockchain explorations.

Funding Via Bridges

If you already have funds on Ethereum Mainnet, by far the easiest way to get your crypto on to L2 is to use a bridging protocol. Bridges are the name we’ve given to protocols designed to help us move our funds around the cryptoverse, and there are a number of bridges designed to move crypto from Ethereum Mainnet to Layer 2s.

Native Bridges

Native bridges are those designed by the Layer 2 protocols themselves. On an optimistic rollup like Arbitrum, Optimism, or Base, deposits usually arrive on L2 within a few minutes, but moving crypto back to Mainnet takes about one week. The Arbitrum Bridge and the Optimism Bridge both work this way: the waiting period gives the network time to catch invalid withdrawals before they settle.

Third-Party Bridges

Because no one likes to wait, a number of third-party bridging services exist to help us move our funds instantly to and from L2s. Among the most popular options are Across Protocol and Relay, but you can use Bungee to compare bridging fees across a number of protocols. To use Across, for example, all you need to do is:

1. Go to the Across Protocol bridge and connect your wallet.

2. To bridge funds to L2, select Ethereum under ‘From’.

3. Choose your asset and the amount you wish to bridge (Pro Tip: only bridge a blockchain’s native coin, in this case ETH).

4. Next, select your L2 solution in ‘To’.

5. Review the transaction, and if all looks correct, select ‘Send’.

Moving funds from Mainnet to L2 is really that simple, and nearly all bridges work the same way. Select a blockchain to send funds from, choose a destination like Base or Optimism, pick an asset and amount, and across the blockchain crevice you go. Pro Tip: As with sending from a CEX, you can use L2BEAT to find a compatible bridge for your L2 destination.

The Road to L2

Layer 2s offer users of all experience levels the opportunity to experiment with decentralized finance in a way that is often prohibitive on Mainnet. Because it costs mere pennies to transact on these networks (you can compare costs here), it’s a great place to become familiar with the basic building blocks of decentralized finance, such as swaps, liquidity pools, or yield farms.

Using a CEX or a bridge to move funds to L2 is a necessary step in your journey from crypto novice to crypto competency. Remember, to see your funds displayed in your wallet, you may need to add the network in your wallet settings, which can be done at Chainlist. If you just want to check that the funds made it safely to your L2 wallet, you can look up your address on a block explorer like Blockscan, which searches many networks at once, or go to a DEX, like Uniswap, and select the L2 network and the asset to see your balance.

As you scale up your skills, you’ll need to figure out how to scale down your transaction fees. Learning how to fund an L2 wallet is the first step, but the next steps on your crypto journey are up to you. Welcome, explorer, a new world awaits.

Let’s get moving, Layer 2 Ethereum awaits! We hope you’ve enjoyed this entry in the Explorer’s Handbook: ‘Funding a Wallet on Layer 2’.

Don’t forget to collect this entry if you want to own a copy for easy reference on your travels, or to support future content at Bankless Academy. Safe travels, Explorer!

Author

Hiro Kennelly is a writer, editor, and coordinator at BanklessDAO and the Editor-in-Chief at Good Morning News. He is also helping to build a grants-focused organization at DAOpunks.

Editor

Trewkat is a writer and editor at BanklessDAO. She’s interested in learning as much as possible about crypto and NFTs, with a particular focus on how best to communicate this knowledge to others.

Patron

This article was funded by Optimism.