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By Kapil Rajyaguru
Primarily, blockchain consists of 5 layers: hardware infrastructure layer, data layer, network layer, consensus layer, and application layer. Each layer has unique functionality.
In the decentralized ecosystem, a Layer-1 network refers to a blockchain, while a Layer-2 protocol is a third-party integration that can be used in conjunction with a Layer-1 blockchain.
The term Layer 1 refers to the base level of a blockchain architecture. It’s the main structure of a blockchain network.
Bitcoin, Ethereum, Polkadot, Solana and BNB Chain are examples of Layer 1 blockchains.
They are the base-layer blockchains that process and record transactions for their respective ecosystems, featuring a native cryptocurrency, typically used to pay fees and provide broader utility.
Layer 2 refers to networks built on top of other blockchains.
So, if Bitcoin is a Layer 1, the Lightning Network that runs on top of it is an example of a Layer 2.
Arbitrum, Optimism and Polygon are also examples of Layer 2 scaling solutions.
A Layer 1 solution will change the rules and mechanisms of the original blockchain directly.
A Layer 2 solution will use an external, parallel network to facilitate transactions away from the mainchain.
As the number of users increases and the number of simultaneous transactions goes up, a Layer 1 blockchain can become slow and expensive to use.
Usually, layer 2s are faster and cheaper than the base layer of the blockchain. Sometimes, they can do things that layer-1 blockchains cannot, such as accept assets from other layer-1 blockchains.
What’s next after Layer 1 and Layer 2?
There is a good chance large chains like Ethereum will still dominate due to their large user and developer community. However, its large, decentralized validator set and trusted reputation creates a solid base for targeted Layer 2 solutions.
However, there are new set of blockchains emerging that are now being classified as layer 3. These blockchains help hoist DApps and the protocols that enable the apps.
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