The Tangle is a directed acyclic graph (DAG) whose protocol the entire Iota blockchain ecosystem relies on and it’s now well known that the ecosystem is complex, with Layer 1, Layer 2, etc… being thrown around when talking about scalability, performance. Differentiating between these layers is necessary for beginners who are interested in getting into blockchain technology or to analyze projects.
Layer 1 blockchains form the base of the network, with Layer 2 solutions being roll-ups on top of that to bring more speed and features, while roll-ups are an integral part of the Ethereum roadmap. Use cases and examples are also included to help: this is explained in a better way through plain language and simplified explanations.
Understanding Layer 1 Blockchain
A Layer 1 blockchain is the base layer of a blockchain network. It handles the core functions, including transaction validation, consensus, security, and data storage. Popular examples of Layer 1 blockchains include Bitcoin, Ethereum, and newer networks like Solana or Sei. These networks are responsible for maintaining the integrity and security of the entire blockchain ecosystem.
For non-technical people, a Layer 1 blockchain can be roughly thought of as a house’s foundation. Think of it as the frame of a building, it helps keep everything stable and secure, and everything built on top runs smoothly. Other solutions cannot operate securely or efficiently in the absence of a strong layer 1 blockchain.
If you want to see this in action, take a Layer 1 blockchain that is capable of smart contracts. Developers can build dApps straight on this network, which acts as a base layer for processing transactions correctly and safely.
What Is a Layer 2 Blockchain?
Layer 2 solutions are secondary layers or protocols that are built on top of an existing Layer 1 blockchain. Layer 2 solutions achieve this by leveraging security of the base layer and making trade-offs that favor scalability and cost reduction. Layer 2 networks can either process transactions off-chain or in a way that lightens the load on the main blockchain.
Think of it as a highway system. The Layer 1 blockchain is the main street, and Layer 2 are overpasses, underpasses and express lanes that enable traffic to move more efficiently. Transactions are faster and cheaper, but still settle to or derive their security from the underlying Layer 1 blockchain.
Notable Layer 2 solutions are rollups on Ethereum, that compress transactions and are submitted to the main chain as a single proof, and state channels, that permit users to transact off-chain and then conclude results on Layer 1. These solutions enable high-velocity applications, such as payments or gaming, to become more feasible.
Key Differences Between Layer 1 and Layer 2
While both layers are part of the same blockchain ecosystem, their roles and characteristics differ significantly:
- Security: A Layer 1 blockchain provides full security and decentralization. Layer 2 inherits this security but adds a layer of abstraction that can introduce minor trust assumptions.
- Scalability: Layer 1 networks often face limitations in transaction throughput and latency. Layer 2 solutions increase throughput by processing transactions off-chain or in optimized ways.
- Cost: Transactions directly on Layer 1 can be more expensive due to network demand. Layer 2 reduces costs by batching or compressing transactions.
- Complexity: Layer 1 is foundational and simpler for basic operations. Layer 2 introduces additional mechanisms for efficiency but can add complexity for developers and users.
Use Cases for Layer 1 and Layer 2
A Layer 1 blockchain is ideal for applications in which security and decentralization must be prioritized, including cryptocurrency transfers, large-dApps, and any platform where trustlessness is vital. Ethereum’s base layer guarantees that smart contracts run as intended and cannot be altered.
Layer 2 solutions are more appropriate for high-volume or cost-sensitive use cases, including micropayments, NFT trading, or live gaming. They offload some of the traffic from the base layer but still use Layer 1 for final settlement and security.
Conclusion
In short, “Layer 1” is a native blockchain infrastructure that serves as the basis for all other blockchain services, such as consensus, transaction processing, and security. Layer 2 provides an additional layer of infrastructure on top of the base blockchain, improving scalability, transaction speed and cost effectiveness. This is an important distinction for beginners to understand as they explore the blockchain space, select platforms, and find out why both layers are necessary for today’s decentralized apps. Developers can leverage the best aspects of Layer 1 and Layer 2 to implement secure, scalable, and usable blockchain solutions.