<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">Introduction</h2>
Layer 2 solutions are changing the economics of NFTs without much fanfare. High gas fees brought on by Ethereum's popularity and opportunistic miners have prevented many users from benefiting from on-chain services for years. After all, most people aren't interested in spending $10 of gas to manufacture a $1 collectible. This is particularly true when it comes to casual and everyday games or rewards programs.
Fortunately, networks that can scale like <a href="https://www.lbank.com/trade/matic_usdt" target="_blank" rel="noopener">Polygon</a> and <a href="https://www.lbank.com/trade/arb_usdt" target="_blank" rel="noopener">Arbitrum</a> are now keeping users from facing this substantial barrier of entry. The Layer 2 protocols are introducing fast, cheap, and frictionless NFT transactions, breaking the barrier of NFTs as an asset class and turning them into something entirely different: tools to engage with the real world.
This article will discuss how Layer 2 solutions reduce gas fees, enabling micro-transactions that open an entirely new world/class of opportunity with NFTs in gaming rewards, digital loyalty, and ubiquitous utility of NFTs overall.
<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">Gas Fees and NFTs</h2>
NFTs are unique digital objects or items on blockchain platforms, such as collectibles, badges, passes and proof of participation. However, each of those interactions around an NFT has a cost. Each minting, transfer, and claim utilizes resources from Ethereum.
Gas fluctuates in price based on network congestion, which increases during busy times, such as an NFT mint or token launch. At times a single NFT claim can be $20. This unpredictable cost ruins the experience for users that are building games or reward programs.
Take for example a mobile game that gives medals for daily check-ins. Now let&rsquo;s say you want to mint those NFTs on the Ethereum mainnet. The cost to mint them is most likely higher than what the value of the NFTs are. That would be the same for minting or moving a loyalty program fidelity stamp worth a $1 reward grocery store.
Because of ETH gas costs, NFTs feel more like luxury items than tools to engage with many people. If NFTs and other blockchain tools are to be useful, it needs to feel quick, cheap, and reliable. This is the utility of Layer 2s.
<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">What Do Layer 2s Do?</h2>
Layer 2 solutions provide a way to improve the way Ethereum works while also reducing the costs of transactions. Instead of processing every single transaction on the Layer 1 foundation of Ethereum, Layer 2s propose to batch or compress transactions or run transactions off-chain, and then periodically settle the results on Ethereum for security or record-keeping.
In essence, Layer 2s are like side roads next to the bustling main freeway of Ethereum, still busy and costly to travel, but now you have side lanes to conduct thousands of small transactions at a much quicker speed and cost.
The benefits are clear and immediate:
<ul>
<li style="line-height: 1.38;">Transactions are confirmed in seconds rather than minutes.</li>
<li style="line-height: 1.38;">Costs have dropped from a few dollars to a few cents.</li>
<li style="line-height: 1.38;">The entire system becomes more scalable due to lower network congestion.</li>
</ul>
This finally makes it financially viable to mint, trade, or redeem NFTs/collectibles in the same day.
<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">Arbitrum and Polygon</h2>
Amidst the effectively snowballing Layer 2 family of networks, Polygon and Arbitrum are consistently the most well-known. Both solutions have some relation to Ethereum, although they build respective ecosystems for different purposes.
Polygon has established itself as a go-to system in the move to Web3. Polygon has established itself as an extraordinarily well-connected Layer 2 to institutions like Starbucks, Nike, and Reddit yet charges low, consistent fees usually 1 cent or less. These brands use Polygon to reward its users with NFTs used as loyalty badges, membership passes, and community rewards in a way that does not overly complicate them.
<a href="https://www.lbank.com/explore/arbitrum-arb-ethereums-leading-layer2-powering-scalable-defi" target="_blank" rel="noopener">Arbitrum</a> really caters more towards the developers' need for scalability. It is uniquely built for more complicated applications requiring higher throughputs while working through Ethereum's architecture making it attractive for projects migrating from the main-net or trying new types of NFT mechanics using DeFi components to innovate and experiment.
Simply put, while Polygon largely aims at speed and accessibility, Arbitrum is seeking contributing ideas and is focused on the actual possibilities around composability and reducing developers' cognitive load. Polygon and Arbitrum together create an infrastructural layer that keeps NFT utility developing.
<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">Micro-Transactions Are Now Available</h2>
Layer 2s are really special because they are making microtransactions useful again. Just this one adjustment allows NFTs to function in a completely different way.
For example, in video games, it is now possible to reward NFT badges or skins or power-ups for completing certain in-game objectives. All of this happens instantly, and for almost no cost. A developer can build out a framework where every action a player takes in the game is logged on-chain, and thus you have verifiable player histories and player economies. This wasn&rsquo;t possible when fees were greater than rewards.
Layer 2s in loyalty ecosystems enable companies to create real NFT-based rewards for every purchase. A coffee shop could offer collectible &ldquo;stamps&rdquo; that customers could earn to accumulate towards discounts or specials. The strategy works at scale because each mint costs only a few pennies.
The end result would be a total transformation of how a person looks at NFTs as not something to buy or sell, but something that improves your daily life.
<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">Examples from the Real World</h2>
Low-cost layer 2 NFTs are continuing to operate in real world use cases.
Polygon powers several brand projects where consumers are interacting with NFTs and are not aware that they are interacting with crypto wallets. For example, Starbucks Odyssey gives users digital collectibles that illustrate their activity. These NFTs unlock rewards, episodes, events, and experiences within the community they participated in, and have been entirely enabled by Polygon's low cost transaction fees and transaction speeds.
Game development studios are not standing still, either. Polygon and Arbitrum-based games have NFT items in-game that can be traded or upgraded in real-time by players. Because fees are low and speed is fast, developers can lean into NFT functionality and advanced gameplay mechanics rather than simply leveraging NFTs as a reward.
There have also seen the emergence of NFT ticketing and NFT proof-of-purchase or redemption to brick and mortar stores for merchandise. Consumers are issued unique NFT tickets or proof-of-purchase tokens for participating in an event, and those NFT tickets evolve into more personal rewards over time. Some even come with built-in custodial wallets so users can't see the layer of the blockchain if they want to. NFTs in this context are merely a type of app reward for the consumer. Users will no longer have to deal with key management or gas fees. The blockchain layer has all but disappeared for the consumer, but all of the benefits are still there.
<h2 dir="ltr" style="line-height: 1.38; margin-top: 18pt; margin-bottom: 4pt;">Conclusion</h2>
Layer 2 protocols like Polygon and Arbitrum are the unsung heroes in the next wave of NFT adoption. They have resolved Ethereum's gas fees problem and transformed NFTs from a high value collectible into useful digital tools that people will use every day.
Microtransactions like in-game prizes or loyalty points are inexpensive, fast, and can easily be amplified. This move from NFTs as collectible to NFTs as a daily use digital tool is the real potential of NFTs: not trading them for fun, but using them, owning them, and being part of them, on a daily basis.
The next step is clear for both Web3 projects (creators) and consumers. Learn more about projects that are integrating Layer 2s into their stack. Try out loyalty programs or games that use Polygon or arbitrary. You will see how NFTs can be more than expensive collections, but in fact useful experiences.
As scaling technology improves, there is basically no cost associated with being creative. And in that world, NFTs can finally be what they were always designed to be: a mechanism to tie owning something online into doing something in real life.
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<h4>This article is contributed by an external writer: Jocelyn Hamoy.</h4>
&nbsp;
Disclaimer: The content created by LBank Creators represents their personal perspectives. LBank does not endorse any content on this page. Readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

Layer 2s like Polygon and Arbitrum enable cheap NFT micro-transactions, shifting them from costly collectibles to daily utility tools for gaming, loyalty programs, and real-world engagement.

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