Layer 1 Blockchains: List and All You Need to Know - Is Crypto Over
When discussing blockchain technology, the concept of layer 1 (L1) refers to the foundation of a network. Essentially, an L1 blockchain is the bedrock upon which all other components are built. Its primary function is to provide the most basic services such as recording transactions and ensuring network security. It's important to note that L1 solutions cL2s allow for faster, more cost-effective transactions by processing them outside of the main chain, then sending them for finalization. This is done through two different types of rollups, zk-rollups and optimistic rollups, where trust is embedded through either complex calculations (zk-rollups) or the use of validators and fraud proofs (optimistic rollups).an be limited in terms of scalability, decentralization, and security.
What is a Layer-1 blockchain?
Layer 1 blockchain technology forms the foundation of the blockchain architecture. In contrast to Layer 2 solutions, Layer 1 blockchains independently validate and execute transactions, with transaction fees reimbursed in crypto.
Ethereum, for instance, processes transactions without relying on external systems and utilizes its native cryptocurrency, Ether. As the bedrock for all other components, Layer 1 blockchains provide essential services, but can be limited in terms of scalability, decentralization, and security.
Types of Layer 1 Blockchain
Layer 1 blockchains comprise the most well-known examples in the blockchain space, including Bitcoin, Ethereum, Avalanche, and Cardano. However, it's important to note that L1 solutions are not without limitations in terms of scalability, decentralization, and security.
Despite these challenges, L1s provide critical services to a network, serving as the bedrock upon which all other components are built. Developers have been able to mitigate some of these limitations by adding architecture under or on top of the L1 chain. As the blockchain space continues to evolve, it will be interesting to see how L1 chains and other layers will adapt to meet the needs of users and developers alike.
Layer 1 blockchains serve as the bedrock for blockchain architecture, where every transaction is recorded and accounted for in a public ledger. The blockchain's building blocks, called blocks, are created by miners or validators and recorded on the network's L1 chain.
These blocks are organized structures that link to previously-created blocks in a sequence and contain details related to new transactions.. This results in a secure and immutable ledger that we know as the blockchain, making it possible to record and account for every transaction.
Transaction finality is a critical concept in blockchain technology. It refers to the point where a transaction is recorded in an irrevocable state on the chain, ensuring that it cannot be changed or undone. The amount of time this process takes can vary depending on how a blockchain is designed.
It is critical to realize that while transactions may be able to be handled on other networks or blockchains, the only place where they can be officially completed is on the principal blockchain.. This means that once a transaction is finalized on the L1 chain, it is set in stone and cannot be altered or deleted. It's a bit like carving your initials into a tree - once it's done, there's no going back!
Cryptocurrencies such as Bitcoin, Ethereum, Cardano, and Dogecoin can be used to cover the costs of transactions and to compensate the miners/validators. Coins are indispensable for the functioning of the L1 chain.
On the other hand, tokens like UNI, DAI, LINK, and SAND are utilized to empower decentralized networks and apps built on a L1. This distinction is crucial to understanding the inner workings of the blockchain space and its many layers. By appreciating these nuances, one can gain a better understanding of the complex interplay between coins, tokens, and the larger blockchain ecosystem.
An L1 chain is the bedrock of blockchain architecture, dictating the security measures of a network, including the consensus mechanism employed, like Proof of Work or Proof of Stake, and the rules that govern how validators interact. Although other blockchain layers can offer security measures, L1s are the ultimate authority on ecosystem security.
What is the main limitation of layer 1?
Layer 1 blockchains strive to furnish quintessential blockchain functions. However, achieving a balance among these three objectives is a challenge and hence, known as the blockchain trilemma.
The early Layer 1 chains, specifically Bitcoin and Ethereum, focused on decentralization and security, which resulted in limited scalability with increased adoption. Due to this, developers of Layer 1 have either adjusted their designs to put scaling first, or created solutions that don't use the blockchain. There are a limited number of methods by which Layer 1 blockchains can increase their scalability by changing their original design. These approaches include:
Increasing block size: Bigger blocks can accommodate more transactions, thereby increasing the network's speed. However, this necessitates an increase in hardware requirements for computers securing the network (nodes), which could lead to centralization.
Alternative consensus mechanisms such as Proof of Stake (PoS) can be more efficient than Proof of Work (PoW) blockchains, but may be perceived as introducing a risk of security and centralization issues.
Layer 1 blockchains can use sharding to improve transaction speeds, but this can result in reduced security due to the complexity of communication between shards.
How do other layers relate to layer 1?
In order to improve upon the limitations of layer 1 (L1) blockchains, developers have looked to add architecture underneath the L1 chain (layer 0) or on top of it (layers 2 and 3). Layer 2 (L2) solutions are platforms that generally enhance the functions of L1 technology, typically by increasing scalability. Second-layer networks are frequently built upon existing first-layer networks, necessitating users to shift their assets from the primary chain to the second-layer chain through a bridge..
Layer 2 Solutions:
L2 solutions can be standalone blockchains while still borrowing security from their dedicated L1 network. Transaction processing can be sped up and fees reduced by using Layer 2 (L2) networks, which process transactions outside of the main chain (L1) and then pass them onto the L1 to be finalized.
This is achieved through the use of two types of L2s, zk-rollups and optimistic rollups. Both bundle a number of transactions together and send them to the L1 all at once. The main difference between the two is the way trust is established. In zk-rollups, a set of complex calculations known as zero-knowledge proofs are used to confirm that the transactions are valid. For optimistic rollups, validity is assumed until it is challenged by validators through a process called fraud proofs.
Layer 0 and Layer 3
The definitions of layer 0 (L0) and layer 3 (L3) are even less clear, but no less important to the crypto space. L0 comprises the people who make up the crypto community, from developers to end-users. This concept of L0 encompasses the belief and goals that are shared within a blockchain network, and allows for the development and involvement of its members.
L0 is also used to characterize blockchains that underpin other blockchains, such as Polkadot and Cosmos, which provide platforms and security for multiple, interconnected, application-specific L1 chains. Layer 3 is where blockchains interact with each other, or the interoperability layer.
Examples of scaling solutions built on top of layer two (L2) networks are Cosmos' Inter-Blockchain Communication (IBC) protocol, Ripple's Interledger Protocol (ILP), and other scaling solutions referred to as layer three (L3)..
Q: What is Layer 1 Blockchain?
A: Layer 1 Blockchain is the main entry point for transactions to be processed and stored on a secure, immutable ledger. It establishes consensus protocols, defines the transaction rules and validates every transaction that is processed over the blockchain.
Q: What are some benefits of Layer 1 Blockchain?
A: Layer 1 Blockchains provide several key benefits to users, businesses and developers, including being immutable and secure, highly resilient against malicious attacks, and having fast transaction processing times.
In conclusion, understanding the different types of layer 1 blockchains and their limitations is crucial for anyone interested in the blockchain space. While L1 blockchains provide the most essential services to a network, they often face challenges with decentralization, security, and scalability.
However, developers have been able to mitigate some of these limitations by adding architecture under or on top of the L1 chain. As the blockchain space continues to evolve, it will be interesting to see how L1 chains and other layers will adapt to meet the needs of users and developers alike.