Layer 2 scaling refers to solutions built on top of a blockchain, like Ethereum, to improve transaction speed and reduce costs. These solutions handle transactions off the main blockchain, allowing for faster processing while still benefiting from the security of the underlying network. Common Layer 2 solutions include state channels and rollups. State channels allow users to conduct multiple transactions off-chain and only settle the final result on the main blockchain. Rollups, on the other hand, bundle many transactions together and submit them as a single transaction, enhancing efficiency and reducing congestion on the main chain.