As #Ethereum transitions to Layer 2, I want to try to help the average user understand this change better

Quick thread on what is 'Layer 2' + how do I use it? Using @loopringorg Layer 2 as an example

From the viewpoint of someone who has a Coinbase account + Metamask address

A good way to think about wallets + addresses in #crypto is that every address has multiple Layers built into it - but requires special integration to access each Layer

A new "wallet" creates a new "address"

A new "address" has Layer 1 + Layer 2 levels already built in

When you open a Coinbase or Binance account, they create a new "wallet" + "address" for you, which THEY control

Currently almost all exchanges are only integrated with "Layer 1" of Ethereum

Meaning they can't access/see Layer 2 of these addresses (even though they are there)

Same goes for Metamask

When you setup a new Metamask wallet, it gives you a new "address"

The difference is YOU control this wallet/address

But by default, you still can't access the 2nd Layer of this address without a proper integration (or 'portal')

When you buy $ETH on Coinbase + send it to your Metamask address, what's happening is:

Coinbase is accessing your wallet for you + sending your ETH from your Layer 1 Coinbase address to your Layer 1 Metamask address

Layer 1 just means it sits on Ethereum directly

So how do I access or "get onto" Layer 2?
(using @loopringorg as an example)

1) via web app - http://exchange.loopring.io 

This 'portal' opens up (activates) the 2nd layer of your Metamask address

BUT - your $ETH is still sitting on the 1st Layer of your Metamask address

SO - you need to deposit your $ETH onto the 2nd Layer of your address to "activate" + start using it on L2

Whatever funds you send to the 2nd Layer will now be usable "gas-free" across the Loopring Exchange - which is integrated to interact with the L2 level of your address

2) via mobile app - http://loopring.io 

This sets up a brand new Smart Contract Wallet for you (new wallet + new address)

This is a REPLACEMENT for your Metamask

The benefit of this option is extra safety (social recovery + no seed phrases) but costs extra to setup

To reiterate... for either Option

All wallets/addresses have multiple "Layers"

Most of #crypto currently is only integrated w/ Ethereum Layer 1

So there is one extra step (txn) to get these funds from L1 to L2 - but once there - you can do alot + avoid any further gas-fees

While on @loopringorg Exchange - you have lots of options available

You can participate in AMM Liquidity Providing
(earn APY from fees)

You can swap to other tokens

You can transfer to friends/other wallets

All of this is "gas-free" while your funds remain on the 2nd Layer

When/if you decide to "exit" Layer 2 -

it just means you're sending your funds back to the Layer 1 level of your wallet/address (which sits directly on the Ethereum)

As Layer 2 grows + expands though, I don't see why you would ever need to "exit" back in the future

Anyways, that's it - I hope this helps some people + clears up some of the confusion/ questions I get



Tweet @ me any other confusing things about Layer 2 + I will try to do more threads on the topic

Hopefully in the future more apps/exchanges start to integrate with Layer 2

For example Coinbase could integrate Layer 2 one day so when you send $ETH from them to your Metamask it just goes directly to the Layer 2 part of your address

But until then it's just one extra step