Blockchain layer 1 and layer 2 technologies | layer 1 vs layer 2 blockchain




The mastermind of every single cryptocurrency project is the blockchain, and the scalability of the blockchain now is a pressing and constant need.

The nascent cryptocurrency and the technology behind it can be seen or tagged as the case may be as a “DISRUPTIVE INNOVATION”. Disruptive in this case is that the technology when introduced into any economy, changes totally its traditional mode of operation. However, despite how globally transforming the technology can be, there are still challenges peculiar to it which must be solved in other to wield greater and global acceptance.

To understand the architectural structure of different blockchains, the formation of projects, and their inter-relatedness, protocols, and their development, the concept of Layer 1 and Layer 2 networks emerge.


The layer 1 is a term to describe projects that have built their own blockchain-based foundation and also an ecosystem that allows developers to build software applications on them. It permits app developers to then choose their preferred platform to develop their applications on. For example,

> A decentralized exchange (DEX) app like UNISWAP,

>  AXIE INFINITY a gaming app

>  OPEN SEA app; an NFT marketplace

> Aave; a financial project that is decentralized and purposed for allowing people to lend, stake and borrow crypto, are all built on the Ethereum blockchain which Is a layer 1 protocol.

The layer 1 can also be called the base layer of a blockchain network which interlinks nodes on the blockchain and their consensus mechanisms. They are tasked with the responsibility to validate and settle transactions on their own network without the need of another. Other network examples on the layer 1 blockchain are; Cardano (ADA), Algorand (ALG), Ethereum (ETH), Tron (TRX), Bitcoin (BTC), Avalanche (AVAX), and many others.

The SCALABILITY PROBLEM of layer 1 networks is a significant and major barrier to most projects on the network.  Let us understand the Scalability Problem first and then know what has been done on how to solve the problem.

Meaning Of The Scalability Problem

The scalability problem is a term used in the crypto and blockchain verse to describe the inability or to describe how challenging it is for nodes on a layer one blockchain network to perform a process and validate a transaction in times of increased transaction volume. The inability can be due to the consensus mechanism that is functional in the network. 

This problem is a result of the “Blockchain Trilemma” concept propounded by the founder of the Ethereum network, which holds that the blockchain cannot function effectively with all its three characteristics (decentralization, security, and scalability) -which make up an ideal blockchain- in one layer. That it can only feature two out of the three. 

With this mode of operation, some projects on the network then optimize decentralization and security on the layer 1 level and delegate its speed characteristic to an off-chain layer or the Layer 2 scaling solutions. The popular Bitcoin network is a good illustration.

What then is an Off-chain layer? And what are Layer 2 solutions? These questions will also be answered in this article.

Since it is the case that the scalability problem is the inability of the main layer to improve efficiency and output in times of increased demands what then can be the solution to the problem?

The Scaling Solutions

Developers and research teams globally have been working hard on solving the Trilemma problem of the blockchain so as to allow a network to express and function with its whole characteristics directly on the blockchain, seamlessly and undisturbed. Well, fortunately, different solution methods arose, such as;

* Increase in block size i.e. to improve the data capacity of a block, allowing the block to be able to accommodate more data than usual.

Change in consensus protocol; The Bitcoin and Ethereum network both use the POW (Proof of Work) mechanism as their traditional consensus mechanism. It is very effective in its strengths (consensus and security) but compromises when it comes to speed and resource management. It is said that the Bitcoin network throughput rate is about 7-10 transactions per second, and the Ethereum is about 15-20. 

      Due to the inability to scale its TPS (Transaction per Second) rate on the POW kind of mechanism, the Ethereum network is now upgrading from its old and clunky mechanism to a newer consensus protocol, the POS (Proof of Stake) mechanism. 

      It is also noted worthy, that the upgrade to the newer protocol i.e. from POW to POS will require the majority of the participants on the network to reach an agreement on the upgrade, which can be a long, slow, and seemingly impossible process. The chances are high also that during the process of the upgrade if care is not taken, a fork might occur either soft or hard- causing numerous and severe damage to the network.

      * Sharding:  A shard is a discrete blockchain that is linked to the main blockchain via two-way pegs which enable assets to be interchanged between the main blockchain and the sidechain. Sharding a network requires breaking down various transactions and validation processes done by the network into different manageable pieces called shards. 


     The processing of the various transactions in different shards and different nodes is also done simultaneously in parallel on the main chain. This method is a good, acceptable, and adaptable scaling solution to layer1 blockchain.


The layer 2 scaling solution is a term to describe projects that are built on top of the layer one blockchain. They are designed to increase transaction speed, decrease transaction costs (i.e. gas fees), and help the layer 1 ecosystem scale. The layer 2 protocols can also be referred to as ‘side chain network’ or an ‘off-chain layer’. 

Generally, scaling solutions are typically the off-chain layers of the blockchain built on the layer one foundation network for the increase in TPS.  Most of the layer 2 solutions are efficient in processing thousands of transactions at the same time off the main chain without the fear of compromising or affecting the main network and then report back to the main chain's already completed transaction for final validation.

In the gaming world which requires a constant and fast transaction process, developers would not use the Bitcoin network to develop a gaming app due to its lengthy transaction time. Though the developer would still want to utilize the network’s security and decentralized feature, it is rather best to build atop the layer 1 network a layer 2 solution that can provide the necessary speed required. Examples of the layer 2 solutions include:

·       Lightning network solution - Bitcoin

·       Plasma solution - Ethereum

·       Polygon network - Ethereum

·       Liquid network – Bitcoin

Closing thought:

The understanding of the overall layer and architecture of the blockchain ecosystem today, based on these two different layers will be helpful to understand the purpose of new projects emerging and their base foundations.

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