The term “Layer 1” describes the fundamental basis of a network like Bitcoin, BNB Chain, or Ethereum. Layer-1 blockchains may complete transaction validation and settlement independently of any other networks. As Bitcoin has shown, it’s not easy to make changes that improve the scalability of layer-1 networks. Engineers have responded by developing layer-2 protocols that can achieve security and consensus by using the underlying layer-1 network. An example of a layer-2 protocol is the Bitcoin Lightning Network. Customers can make purchases anonymously before having their details added to the main chain.
The terms “layer 1” and “layer 2” are useful for learning the frameworks of various blockchains, initiatives, and programming instruments. Understanding the multiple layers of the blockchain will shed light on the connections between chains like Polygon and Ethereum or Polkadot and its parachains.
What is layer 1?
Layer-1 networks are another name for a blockchain‘s underlying data structure. BNB Smart Chain (BNB), Ethereum (ETH), Bitcoin (BTC), and Solana are all examples of layer-1 protocols. We refer to them as “layer-1” networks since they form the foundation of their ecosystem. In contrast to layer-1 solutions, layer-2 solutions like off-chains and others are built above the main chains.
Simply put, layer 1 refers to the processing and finalization of transactions within a given token’s own blockchain. Furthermore, they have their own local currency for making monetary exchanges.
Issues of scale in layer-1 networks continue to be an issue. It has been difficult to process transactions on Bitcoin and other large blockchains during periods of high demand. Bitcoin uses the time-consuming and resource-intensive Proof of Work (PoW) consensus procedure to reach consensus.
Although Proof-of-Work (PoW) encourages decentralization and security, it also slows down PoW networks when transaction volumes are high. This increases costs and delays the time it takes to confirm a transaction.
Engineers in the blockchain space have been working on scaling solutions for years, but opinions remain divided on the most promising approaches. Scaling options at layer 1 could include:
- Increasing the size of blocks to allow for additional transactions
- Introducing a new consensus mechanism, as with the upcoming Ethereum 2.0 release
- Activating sharding is the third step. The term “database partitioning” describes this method.
Installation of Layer 1 improvements is effort-intensive. It’s likely that not all network customers will welcome the change. In 2017, this led to the creation of Bitcoin Cash as a separate cryptocurrency from Bitcoin.
SegWit (segregated witness) in Bitcoin is an example of a layer-1 solution for scaling. Altering the structure of block data (digital signatures are no longer included in the transaction input) improved Bitcoin’s throughput. This adjustment did not compromise the safety of the network, yet it allowed for more transactions per block. SegWit was implemented through a soft fork that is compatible with older clients. Because of this, nodes that have not updated to add SegWit can process Bitcoin transactions.
What is Layer 1 sharding?
To improve transaction throughput, sharding is a common layer-1 scaling method. The method can be used with blockchain-distributed ledgers and is a type of database partitioning. The goal of sharding a network and its nodes is to increase the throughput of transactions by distributing the load over more nodes. Each shard handles a portion of the network’s transactions and nodes and generates its own independent blocks.
Sharding eliminates the requirement for every node to store the whole blockchain. Instead, nodes update the main chain with their local data, including the balance of addresses and other essential metrics, whenever processing is complete.
Comparing Layers 1 and 2
It’s not always possible to solve an improvement problem on the first layer. Some modifications are difficult or impossible to implement on the main blockchain network due to technical limitations. For example, Ethereum is undergoing a lengthy transition to Proof of Stake (PoS).
There are some use cases that cannot function on layer 1 owing to scalability problems. The Bitcoin network is too slow for a blockchain game to be practical. Layer 1’s security and decentralization may still be useful to the game. The most effective strategy is to implement a layer-2 solution on top of the existing network.
In order to complete their own transactions, layer-2 solutions must first rely on those in layer-1. The Lightning Network is one such well-known instance. Under severe load, Bitcoin transactions might take up to several hours to process. The Lightning Network enables users to send and receive Bitcoin payments quickly off the main chain, with the full balance reported back to the main chain at a later time. This combines all of the financial dealings into a single log, which saves everyone time and effort.
Examples of blockchains at the layer 1 level
Now that we realize what layer 1 is, let’s study a few examples. Layer-1 blockchains come in a variety of flavors, with several focusing on niche use cases. Other networks exist in addition to Bitcoin and Ethereum, and their approaches to the trilemma of decentralization, security, and scalability in blockchain technology differ.
Elrond, founded in 2018, is a layer-1 network that uses sharding to boost performance and capacity. The Elrond blockchain can support over 100,000 transactions per second (TPS). Its two key distinguishing features are adaptive state sharding and its own Secure Proof of Stake (SPoS) consensus system.
Changing Situation Shards may divide or merge as the number of users on a network fluctuates. Sharding affects the entire network, including all of its data and transactions. Illegal shard takeovers are less likely to succeed since validators can hop across shards.
Elrond’s native currency, EGLD, is used for everything from transaction fees and decentralized application DApps deployment to rewarding users that help with network validation. Furthermore, the Elrond network is Carbon Negative certified because it reduces emissions more than its PoS approach is responsible for.
Harmony is a layer-1 EPoS network with sharding capabilities. Each of the blockchain’s four shards on the mainnet can independently generate and verify new blocks. Each shard can move at its own velocity, resulting in a wide range of block heights.
Harmony is now pursuing a “Cross-Chain Finance” strategy in order to attract more users and programmers. Trustless Ethereum (ETH) and Bitcoin bridges play an important role in allowing users to trade tokens without the usual custodial constraints that such transactions entail. Harmony’s Web3 scalability solution relies heavily on decentralized autonomous organizations (DAOs) and zero-knowledge proofs.
Harmony’s bridging services will be valuable to users because the future of DeFi (Decentralized Finance) appears to have multi-chain and cross-chain potential. The NFT backbone, DAO tools, and inter-protocol bridges are the key focus areas.
To settle transactions, the network’s native token, the ONE token, is used. Harmony’s consensus approach and governance allow for staking as well. As a result, investigators who contribute to the block can collect block rewards as well as transaction fees.
In 2017, developers forked the Go Ethereum (Geth) network to create Celo, which is a layer 1 network. However, it has made several major adjustments, such as switching to Proof-of-Stake and a new addressing scheme. DeFi, NFTs, and payment solutions are all part of the Celo Web3 ecosystem, which has processed over 100 million transactions thus far. A Celo user’s public key might be either their phone number or their email address. The blockchain protocol may run on standard PCs without the need for any additional software or hardware.
Celo’s principal token is CELO, which serves as a universal utility token for purchases, security, and rewards. The Celo network also supports stablecoins in cUSD, cEUR, and cREAL. Users create them, and a mechanism similar to MakerDAO’s DAI keeps them in place. You can also use any other Celo asset to settle purchases made with stablecoins.
The purpose of CELO’s stablecoin and address system is to expand the adoption of cryptocurrencies. The volatility and fundamental complexity of the crypto market may be disheartening for newcomers.
THORChain is a decentralized exchange (DEX) that runs across many chains. It’s a Cosmos SDK-based layer-1 network. It uses the Tendermint consensus protocol for transaction verification. The core goal of THORChain is to promote cross-chain liquidity that does not rely on centralization, wrap assets, or asset limits. Pegging and wrapping create new degrees of risk for investors across many chains.
THORChain, like a bank, keeps track of your account and processes deposits and withdrawals. This contributes to the growth of decentralized liquidity and the elimination of middlemen. RUNE, THORChain’s native coin, is used for everything from transaction fees to network governance to data security and validation.
RUNE facilitates trades in all other supported assets as the basis pair in THORChain’s Automated Market Maker (AMM) model. The RUNE token functions as a settlement and security asset for liquidity pools, comparable to a cross-chain Uniswap.
Kava is a layer-1 blockchain that combines Ethereum’s developer support with Cosmos’ speed and scalability. The Kava Network’s “co-chain” design provides developers with a distinct blockchain for use with the EVM and another for use with the Cosmos SDK. This, together with the Cosmos cochain’s IBC support, enables developers to create DApps that can communicate with both the Cosmos and Ethereum networks.
Kava uses the Tendermint PoS consensus algorithm, which provides significant scalability to the EVM co-chain’s applications. The KavaDAO is a supporter of the Kava Network, which offers open, on-chain developer incentives to the top 100 projects on each co-chain.
The Kava platform underpins both the native utility and governance token KAVA and the USDX stablecoin. Validators stake KAVA in order to generate network consensus and pay transaction expenses with it. Users can stake KAVA and have testers verify their position in exchange for a portion of the KAVA emissions boost. Keepers and validators can both vote on governance proposals that define the network’s rules.
Startup in 2017 IoTeX‘s goal is to create a layer 1 network that combines blockchain technology and the Internet of Things. This paves the way for “machine-backed DApps, assets, and services” by giving consumers control over their data. Your personal data is important, and blockchain technology ensures that you retain legal ownership of it.
IoTeX is a game-changing solution to data and privacy management that integrates hardware and software without sacrificing the user experience. MachineFi is a platform that makes it easier to acquire digital assets by providing real-world data.
IoTeX’s most recent and highly described hardware offerings are the Ucam and Pebble Tracker. Ucam is a modern home security camera that provides users with peace of mind by allowing them to keep an eye on things without anyone else knowing. The Pebble Tracker is a high-tech GPS device with track-and-trace capabilities and 4G connectivity. It analyzes temperature, humidity, and air quality in real time, as well as GPS coordinates.
IoTeX is a blockchain platform with many layer 2 protocols built on top. The blockchain enables the creation of distinct networks that complete transactions via IoTeX. These chains can also communicate and exchange data with one another using IoTeX. Developers can then quickly and simply construct a new chain to better satisfy the demands of their Internet of Things device. The IoTeX token, or IOTX, is utilized for a variety of purposes, including transaction fees and staking, as well as network administration and verification.
The present blockchain ecosystem consists of multiple layer-1 networks and layer-2 protocols. It’s easy to get lost in the weeds, but once you see the big picture, everything else falls into place. The information provided may be useful for new blockchain projects that prioritize network interoperability and cross-chain solutions.