Blockchain Layer 1 Vs Layer 2: What you need to know

Blockchains, the technology behind digital currencies like Bitcoin, have been gaining traction in recent years due to their ability to provide a secure and transparent method of recording transactions. The blockchain is a distributed ledger that stores and verifies information in a chain of blocks. Each block contains a set of transactions and is linked to the previous block through a cryptographic hash.

There are two main types of blockchains: Layer 1 and Layer 2.

Layer 1 blockchain

Layer 1 blockchain refers to the base layer or underlying infrastructure of a blockchain network. It is also known as the main network or “mainnet” and it defines the core rules of the ecosystem. The primary goal of layer 1 blockchain is to maintain decentralization and security, which are essential for any blockchain network. Examples of layer 1 blockchain include Bitcoin, Ethereum, LycanChain and Solana.

A layer 1 blockchain is responsible for validating and finalizing transactions on its own blockchain. These networks also have their own native token, which is used to pay for transaction fees. One of the main challenges faced by layer 1 blockchain is scalability. As more users join the network and the number of transactions increases, the network can become congested, leading to higher transaction fees and slower confirmation times.

To solve this problem, developers have come up with various solutions such as increasing block size, changing the consensus mechanism, and implementing sharding. Sharding is a form of database partitioning that can be applied to blockchain distributed ledgers. It allows the network to be divided into different shards, which are responsible for managing a subset of the network’s activity. This improves transaction speed and reduces the workload on each node, as it no longer needs to maintain a full copy of the entire blockchain.

Elrond, Harmony and Celo are some examples of layer 1 blockchain that uses sharding to improve scalability. Elrond uses sharding to improve performance and scalability, and can process over 100,000 transactions per second. Harmony uses sharding to increase its throughput and has a unique cross-chain finance strategy to attract developers and users. Celo is a layer 1 network that uses PoS and a unique address system to make crypto more accessible and improve adoption.

In conclusion, layer 1 blockchain is the base layer of a blockchain network that defines the core rules of the ecosystem and is responsible for validating and finalizing transactions. The main goal of layer 1 blockchain is to prioritize decentralization and security, which is maintained by a diverse network of developers and participants. However, due to the immense resources required to maintain a fully functional ecosystem and the Blockchain Trilemma, layer 1 networks may lack scalability. This is where layer 2 solutions come in, as they provide off-chain solutions that reduce bottlenecks with scaling and data, while still maintaining the security and decentralization provided by layer 1 networks. Understanding the difference between layer 1 and layer 2 blockchains is crucial for understanding the architecture and potential of various blockchain projects and development tools.”

Layer 2

Layer 2 blockchain refers to a set of off-chain solutions built on top of layer 1 blockchain networks that aim to solve the scalability issues faced by these base layer networks. These solutions, also known as layer 2 scaling solutions, work by offloading the burden of managing transactions from the mainnet, thereby enabling greater transaction inclusion and throughput.

Examples of layer 2 solutions include rollups on Ethereum, the lightning network on Bitcoin, sidechains, and validiums like StarkWare. Rollups, for example, allow for multiple transactions to be bundled and processed together, reducing the number of transactions that need to be recorded on the main chain. This results in increased efficiency, lower transaction fees and faster confirmations.

Sidechains, on the other hand, are separate blockchains that run in parallel with the mainchain, allowing for the transfer of assets between the two chains. This enables the creation of specialized chains for specific use cases, such as gaming or DeFi, without affecting the performance of the mainchain.

Validiums like StarkWare use validity proofs to ensure the authenticity of transactions, but unlike rollups, they do not store data on the mainchain. This allows for increased scalability as multiple validity chains can run in parallel, each capable of processing approximately 10,000 transactions per second.

However, it’s important to note that layer 2 solutions do not gain security or data from the mainchain and therefore are not considered to be proper layer 2s. They also require specialized languages and have limited support for general smart contracts.

In summary, layer 2 blockchain solutions offer a way to improve the scalability of layer 1 blockchain networks without compromising on security or decentralization. They use different techniques such as rollups, sidechains, and validiums to increase transaction throughput and reduce bottlenecks in data. As a result, they improve the user experience and enable the growth of blockchain technology for more use cases.

Comparison

When comparing layer 1 and layer 2 blockchains, it’s important to understand the key differences in their architecture and purpose.

Layer 1 blockchains, such as Bitcoin, Ethereum and LycanChain, are the foundation of a blockchain network. They define the core rules of the ecosystem and are responsible for validating and finalizing transactions on the network. These blockchains prioritize decentralization and security, but may struggle with scalability due to the immense resources required to maintain a fully functional ecosystem.

Layer 2 blockchains, on the other hand, are built on top of layer 1 networks to improve scalability and reduce bottlenecks with data. These off-chain solutions, such as rollups and sidechains, communicate with the layer 1 network to offload the heavy burden of transactions and improve the user experience. They offer lower transaction fees and higher throughput, but do not gain security or data from the layer 1 network and therefore require additional trust and security measures.

While layer 1 blockchains are essential for maintaining the integrity and security of the network, layer 2 solutions are necessary for scaling and improving the practicality of the user experience. Together, they work in harmony to create a more efficient and functional blockchain ecosystem.