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But then the issue is that the settlement layer becomes an arbitrary implementation detail. The second layer is the thing that really matters. The settlement can happen in dollars or some stock in a portfolio of assets like what Libra wanted to do.

Is Bitcoin the best thing to use as an settlement layer?

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The 2nd layer always maps to the settlement layer as in you're still transacting in Bitcoin, you just don't broadcast the signed transactions to the whole network because you expect to continue your transactions.

You can use eth or any of the thousands of other crypto-currencies, Bitcoin benefits from being the most secure and also having the largest network effects due to being the earliest. When it comes to money, security is the most important thing and Bitcoin offers the most secure settlement layer.

If a credit card is the example of a layer 2, with dollars being the base layer, would you say that dollars don't matter then, and the only thing that matters is the layer 2?

You have it backwards. With credit/bank cards the second layer is dollars that we're transact in. If financial institutions decided to settle amongst themselves with commodity stocks, government bonds or FedCoins would you even notice? It just happens that in the US dollars also make a good settlement layer.

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