Every blockchain runs into the same wall: more people using it means slower and more expensive. Layer 2 is the family of answers to that wall.
Why fees rise
Blocks have limited space. When demand exceeds it, transactions compete for inclusion and the fee is the price of winning. Cheaper transactions are those that need less space or less computation.
The main approaches
- Sidechains. A separate chain with its own rules and its own security. Cheap and fast, and it does not inherit the main chain's security. The trust moves from the main chain to the sidechain's operators.
- Rollups. Transactions are executed elsewhere and the result is posted back to the main chain in batches, so the main chain carries one entry rather than thousands. Different rollups make different trade-offs between cost, speed and how much they rely on their own operators.
- Channels and side payments. Two parties settle many small payments between themselves and touch the main chain once. Efficient, and only useful between fixed parties.
The honest summary: each approach moves cost, speed and trust somewhere different. There is no version that makes all three better at once. That is the trade, and it is the same trade as the one in choosing where you trade.
Why this reaches a depositor
Networks that are cheap and fast make small payments viable, which is what makes on-chain movement of money practical at all. It is infrastructure, and it is invisible until it stops working.
More of the mechanism in how a blockchain works, and who checks the code that does this work in how smart contracts are audited.