Network Fee Architecture: Layer 1 vs. Layer 2

Why does the same transaction sometimes cost cents and sometimes cost dollars? The answer is which layer it settles on. A Layer 1 base fee is the transaction cost set by competitive bidding for block space directly on a base blockchain network.

Layer 1 Base Fees

• Network Congestion Spikes: demand for block space rises.
• Competitive Mempool Bidding: transactions compete for inclusion.
• Premium Execution Pricing: fees rise with demand.

Layer 2 Optimization

Layer 2 optimization relies on the base network for security and settlement while processing some activity off it — commonly by batching transactions before validating them together in a single settlement.

• Congestion Detection: the network identifies rising base-layer demand.
• Off-Base Processing: many transactions are commonly grouped and processed together, away from the base network.
• Lower-cost Transaction Processing: the result settles well below typical base-layer pricing.

Holding your own keys carries a side effect people don't always expect: you also end up choosing, transaction by transaction, which fee layer to settle on — instead of whatever a custodian's infrastructure decides for you.

Fees aren't the only thing tracked block by block — the protocol also runs on a fixed issuance schedule. See the live Bitcoin Halving Clock for how close the network is to its next block subsidy reduction.