What are Layer 1 (L1) Solutions in the Blockchain, and Why Are They Important?

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Loveleen Kaur

But First, What Is Blockchain?

Blockchain is a system of recording information designed to make it difficult to change, alter, or hack the information once recorded. A blockchain is a digital ledger duplicated and distributed across an entire network of computer systems. All that information is stored in blocks that form a chain of historical reference. 

“The blockchain is a database that stores information from transactional records in a universal ledger. Assets are traded and tracked on the blockchain, reducing risk and cutting costs for everyone involved.”- Alex White-Gomez.

Alex has a more in-depth answer to the question in his article What are Layer 2 (L2) Solutions in the Blockchain and Why Are They Important?” I highly recommend taking a look if you are interested in learning more.

What is Layer 1 in the Blockchain?

A Layer 1 is the foundation level of blockchain architecture. Layer-1 blockchains validate and execute transactions on a consensus public ledger without support from another network while reimbursing validators or miners with cryptocurrencies. 

There are two types of Layer 1s, Proof of Work or POW and Proof of Stake or POS. When using proof of work networks such as Bitcoin or Ethereum Classic, there are users called miners that have computers set up to crunch answer complicated equations. The reason why all the systems compete to answer those equations is to update the ledger when things change. When the answer is found, a block is created. That block rewards the first miner for getting the solution with a cryptocurrency.

An example would be if you sent a Bitcoin to a friend, the Ledger worldwide has to be updated. So, for the next block, every machine answers the same question to agree that you sent that Bitcoin to a friend. When people talk about Layer 1s, however, they often refer to Ethereum, which has recently moved to Proof of Stake. POS is where a validator has locked up a certain number of coins and runs a validation node that will validate when changes are made to the network. Instead of crunching complicated equations for blocks, random validators are selected to simply recognize that a change has occurred in the ledger. In either case, POW or POS is the operational layer on which the network functions. There are some cases where Layer 1 is used to facilitate actions such as minting an NFT; however, those transactions require the use of the primary leisure for validation, unlike a Layer 2, which circumvents that validation with an often cheaper, sometimes faster system built on top of a Layer 1 network.

What is Layer 2 in the Blockchain?

Layer 2 solutions extend the functionality of the layer network they are built on. It is often an attempt to correct a limitation of a Layer 1 network—all of which can range from transaction speeds and fees to total throughput and security. 

Layer 2 is a term used for solutions created to help scale an application by processing transactions off of the Mainnet (layer 1) while still maintaining the same security measures and decentralization as the mainnet.

ONE37pm writer Alex White-Gomez has a more in-depth answer to the question in his article What are Layer 2 (L2) Solutions in the Blockchain and Why Are They Important?” I highly recommend taking a look if you are interested in learning additional information.

Layer 1 vs. Layer 2: What are The differences?

A layer one network is a network that acts as infrastructure for other applications, protocols, and networks to build on top of a public decentralized layer one network's primary characteristic is its consensus mechanism. Different consensus mechanisms provide different levels of speed, security, and throughput.

There are just as many similarities as differences between Layer 1s and Layer 2s. Layer 1 systems are typically decentralized networks that use a consensus mechanism such as POS or POW to update their Ledger. Layer twos can be decentralized or centralized, but they often bypass the mainnets consensus mechanism In an effort to increase transaction speeds and reduce transaction costs or gas fees. 

One way to look at Layer 1 versus Layer 2 is by thinking of the Internet as a whole. If the Internet or the World Wide Web is Layer 1, where everything takes place, then Layer 2 would be the web browser you use. That is a gross oversimplification; however, it is the easiest way to view it. If you use the open systems interconnection (OSI) for reference, a Layer 1 could be levels one through six, whereas a Layer 2 could be seen as levels three through seven. The OSI is a conceptual model created by the International Organization for Standardization which enables systems to communicate using standard protocols. While not the same as blockchain, it gives you an idea of how similar Layer 1s and Layer 2s are to each other. 

Just as there are several versions or types of layer 1s (Bitcoin, Ethereum, Cardano), there are multiple types of layer 2s (Polygon, Arbiritum). Ultimately, Layer 1 is intended to be the backbone of the user experience. A Layer 2 solution is intended to improve the Layer 1 network by giving a solution to a problem that is believed to exist on Layer 1 for the user. Where Layer 1 is intended to be the backbone of the user experience.

Which is better, Layer 1 or Layer 2?

 It doesn't appear as though either is better than the other. Where a Layer 1 mainnet is often the definition of security because of its consensus mechanisms, a Layer 2 solutions do not always carry that security. Instead, they strive to do so while improving the end-user experience.  Though Layer 2 solutions are intended to enhance the speed or throughput of the network, many updates to layer 1s, such as Ethereum's move to proof of stake, can improve a Layer one directly. It is to each his own when it comes to which Layer 1 or Layer 2 network you choose to experience the best of web3.

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