Layer 1 blockchains like Bitcoin and Ethereum are setting the rules for Web3. In this article, you'll learn how they scale, differ from Layer 2, and form the future.
One of the fundamental ideas that both novice and experienced market participants come across when discussing cryptocurrencies and networks is the "layer 1 blockchain", commonly referred to as the first level blockchain. Layer 1, or the initial layer, is the cornerstone of the whole decentralized ecosystem. Let's dive deep into the nuances and details of different layers.
What is Layer-1 blockchain
When we talk about blockchain architecture, we often hear the term “layer one”. This term may seem complicated or ambiguous, but its meaning could not be simpler. Layer 1 is nothing more and nothing less than a sovereign blockchain network. Ethereum and Bitcoin networks are two of the most famous examples.
Blockchain technology can be thought of as a food pyramid with several layers. Each layer depends on the previous layers. Layer 0 lays the foundation for the entire pyramid. It includes network protocols, the Internet, and even all the miners, validators, and nodes. Therefore, it is not a blockchain per se, but just a base or a kind of foundational layer or underlying infrastructure.
Blockchain technology can be thought of as a food pyramid with several layers. Each layer depends on the previous layers. Layer 0 lays the foundation for the entire pyramid. It includes network protocols, the Internet, and even all the miners, validators, and nodes. Therefore, it is not a blockchain per se, but just a base or a kind of foundational layer or underlying infrastructure.
Thus, Layer 1 is the only layer independent of any other layers. Layer 2s, such as Arbitrum or StarkNet, depend on their main chain, in this case, Ethereum, to function.
Characteristics of a Layer 1 Blockchain
L1 Architecture
All Layer 1 blockchains share a similar internal structure. They consist of various layers that house the instances and entities necessary for the blockchain ecosystem to operate smoothly. Think of it like a pyramid, where each layer relies on the one below it for tools or data support.
Infrastructure Layer
This layer contains everything that is based on Layer 0 structures. Virtual machines (such as the Ethereum Virtual Machine), containers (simpler, less cumbersome virtual machines), and various communication tools make up this first layer of Layer 1.
Data Layer
When you browse the Etherscan or Blockchair browsers, you have access to all the blocks, and therefore all the smart contracts, transactions, and addresses on the network. Simply put, the data layer is where all the information related to the blockchain is stored. It is in this layer that the history of blocks (and their property package) is constantly being processed.
Network Layer
The network layer, or peer-to-peer (P2P) layer, is very simple. It contains the tools that allow nodes to communicate with each other. This way, each of these nodes can know which blocks have been processed, in what order, and with what information. It is this layer that ensures that the current state of the blockchain is respected by all nodes around the world.
Consensus Layer
This is the most well-known layer, as it is often involved in heated debates about scaling solutions and decentralization. As the name suggests, it contains consensus mechanisms. The two most well-known are:
- Proof of Work (PoW) consensus algorithm, used in Bitcoin in particular, and earlier in Ethereum (before The Merge).
- Proof of Stake (PoS), used in blockchains such as Avalanche or Polkadot, is a cheaper and more scalable alternative to PoW, as it does not require mining.
Alternatives such as Delegated Proof of Stake allow smaller investors to participate. There are many other consensus methods to enhance scalability, such as Proof of Authority in private chains, Proof of History in Solana, or Proof of Access in Arweave. However, these are very often unique to the chains involved and are therefore used by very few chains, unlike consensus mechanisms PoW and PoS.
Application layer
This layer contains all the smart contracts or decentralized applications that interact with the blockchain. This layer can be divided into the user part and the execution part, where smart contracts are executed.
Layer-1 scaling
The main advantage of the blockchain is decentralization. A distributed system ensures that the loss of a small part of the data will not affect the overall functionality. And due to constant checks for authenticity, the network eliminates the possibility of fraud.
But the calculations take a certain amount of time. And this reduces the system throughput. The problem is partially solved by connecting new devices. But the speed of block generation remains low.
The slowdown of the system as the number of nodes (network participants) in it increases is called the scaling problem. It first became known in December 2017. Then the BTC rate began to grow rapidly, and the number of users increased daily.
The developers proposed two blockchain scaling solutions:
- Increase the size of the blocks and optimize the information stored in them. Such solution is effective, but complicates cryptocurrencies. The number of nodes is growing exponentially. This requires a constant increase in the size of the blocks.
- Introduce additional external protocols and optimize the stored information. This method involves collecting a certain number of transactions and encoding them in the Bitcoin protocol.
The second method turned out to be more successful. It is used in the Lightning system. But this solution is also temporary, since the number of new users and the load are growing.
Layer-1 Sharding Concept
Sharding is a database partitioning technology. The core concept here is to break it down into distinct segments, with each one being hosted on its own server.
If we take this technology and apply it to the blockchain, sharding essentially means splitting the network into distinct sections. Each of these sections, known as a shard, holds its own unique set of smart contracts and account balances. Additionally, specific network nodes are assigned to each shard. These nodes are tasked with verifying transactions solely within their own shard, rather than handling all operations across the entire chain.
Problems Sharding Solves
Sharding tackles some significant issues in blockchain networks. As a project gains popularity, it naturally attracts more users, leading to a surge in transactions, dApps, and various activities on the network. This increased activity can slow down transaction speeds and drive up fees, creating hurdles for future growth and development. By splitting the network into smaller pieces known as shards, we can boost its capacity and effectively address these challenges.
When a specific group of nodes manages a particular segment of the ledger, each node doesn't have to keep track of the entire blockchain for every transaction. Instead, transactions can be validated simultaneously rather than one after the other, which enhances the overall network capacity. Consequently, the scaling issues that once plagued the system are resolved.
Additionally, nodes in sharding-enabled blockchains operate more effectively without requiring more processing power because of the decreased load.
How everything operates
Thousands of computers make up blockchains, and it is because of their processing power that distributed registries are able to deploy dApps, execute smart contracts, and conduct transactions.
Every node must process every transaction if the network is based on sequential execution. As a result, it takes a while to verify transactions. Ethereum, for instance, handles roughly ten transactions per second.
A blockchain's performance does not necessarily improve with the addition of nodes. Simply put, the verification chain will grow longer.
The fundamental idea behind sharding is to switch from a linear execution model to a parallel one, where shards process many transactions at once while performing only specific calculations. A sort of "blockchains within a blockchain," where all of the data is condensed and moved to the main chain of blocks.
Which networks are already using sharding
The first network to implement sharding is Zilliqa. It positions itself as a platform whose goal is to use sharding to solve scalability problems. At the testnet stage, it was able to achieve a figure of 2828 transactions per second.
The Near ecosystem calls itself a “sharded PoS blockchain” and claims that its sharding technology allows nodes to remain small enough to operate on a low-performance device.
Ethereum is also going to implement sharding technology. Other sharding networks include Cardano, QuarkChain, and PChain.
Layer 1 examples
Among the most famous “traditional” examples of layer 1 blockchains are:
- Bitcoin
- Ethereum
- BNB
- XRP
- Dogecoin
- Cardano
- Solana
- Tron
- Polkadot
- Litecoin
Layer 1 vs. Layer 2
Layer 2 is an add-on to the main chain. Second-level solutions involve transferring some tasks from the main chain of blocks to another. Such unloading speeds up the main blockchain and helps reduce the cost of transactions.
An example of Layer 2 is Bitcoin's Lightning Network. The second-level solution helps reduce the cost of transactions in the cryptocurrency network and speeds up its operation by processing part of the load.
In LN, users can open payment channels on top of the Bitcoin blockchain and conduct transactions of interest in them. Lightning Network records only the results of transactions in the main chain of blocks.
Benefits of Layer 1 Blockchains
- The fundamental nature of the changes allows us to lay new foundations for the development of the project.
- First-level solutions help integrate new tools into the project.
Challenges and Limitations of Layer 1
- It takes a lot of time to prepare and implement first-level solutions.
- Layer 1 is much more complex than second-level solutions.
Get started with Layer-1 blockchains
If you want to be a part of the blockchain, it is important to follow analytics services such as Etherscan and Solana Explorer, study new research on scalability, follow updates on Twitter, Discord, and GitHub.
Make a wallet for the blockchain you're interested in, try making transactions on the test network, and move on to more difficult tasks like developing infrastructure or participating in the ecosystem.
Conclusion
As the foundation on which Web3 is based, first-layer blockchains will evolve, become faster, safer, and more convenient. There are already quite a few of them, but a significant part of them will not pass the evolutionary selection. Those projects that stand the test of time will form the basis of new technological solutions in all areas of life, from entertainment to medicine and space exploration.
FAQ
1: What is a Layer 1 blockchain?
The purpose of layer 1 protocols is to introduce changes to the architecture of the main blockchain network.
2: How does a Layer 1 differ from a Layer 2 solution?
Layer 1s are the first-level entities independent of any other blockchain. Layer 2s depend on their parent chain to function.
3: Can you provide examples of popular Layer 1 blockchains?
Examples include such large first-layer blockchains as Bitcoin, Ethereum, BNB, XRP.
4: What are the main challenges faced by Layer 1 blockchains?
Many L1 blockchains use the Proof-of-Work consensus algorithm that individual first-layer blockchains run on, which requires significant computing resources and consumes a lot of energy.
As cryptocurrencies become more popular, governments are beginning to regulate this area, and L1 blockchains may face opaque rules and restrictions.
