You may have heard the terms layer 1, layer 2 in relation to Blockchains but what do these terms  actually mean?

Layer 1

In the beginning there were only layer 1 Blockchain solutions.

Bitcoin and Ethereum are Layer 1 Blockchains  as they provide the core functions of the Blockchain network.

This includes creating and validating blocks, executing smart contracts,  processing transactions,maintaining the integrity and security of the network, through mechanisms such as consensus algorithms, cryptographic hashing, and digital signatures.

A layer 1 Blockchain can exist on its own and doesn’t require another Blockchain.

Layer 2

In an attempt to improve certain characteristics of an existing Blockchain developers have opted for several options like:

  • Creating a totally new Blockchain
  • Fork an existing chain and Develop it further.
  • Utilise  the existing Blockchain and provide additional functionality using a second layer.

A Layer 2 Blockchain refers to a secondary framework or protocol that operates on top of an existing Blockchain network, such as Ethereum.

There are several types of Layer 2 solutions, including:

  1. State channels: State channels allow users to transact directly with each other off-chain, reducing the number of transactions that need to be processed on the main Blockchain. This can significantly improve transaction speed and reduce fees.
  2. Plasma: Plasma is a Layer 2 framework that uses a tree-like structure to create a network of smaller, interconnected Blockchains. This can help to reduce congestion on the main Blockchain and improve scalability.
  3. Sidechains: Sidechains are separate Blockchains that are connected to the main Blockchain and can operate independently, but still share the same underlying security and asset values. This allows for faster and more efficient processing of transactions and data.

POLYGON is an example of a layer 2 Ethereum project and requires an Ethereum Blockchain infrastructure to work.

This article covers layer 2 mechanisms in much more detail

The  Lightning Network  is a Layer 2 protocol that operates on top of the Bitcoin Blockchain which seeks to increase transaction throughput and reduce transaction costs.

Overall, Layer 2 solutions are seen as a promising way to improve the scalability and efficiency of Blockchain networks, while still maintaining the security and  core features of the original Blockchain.

Related Tutorials and Resources:

Examining Blockchain Layers

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