Understanding layer-0, layer-1 and layer-2 blockchains
Ever since its inception, blockchain has evolved over the decade into newer generation solutions, better functionalities, and greater acceptance across sectors.
What started as a mere peer-to-peer transfer of electronic money over a decentralized ledger in 2008 has now exploded into the greatest technology known to mankind.
In this post, we discuss different types of blockchain networks as per the layered-architecture concept.
Over the past 7 years, our blockchain developers have aced this line of business by working on a diverse range of projects. So be it building a dapp (layer 3) or a full-stack blockchain network (layer 1), we have trekked a long way.
Henceforth, we decided to put this discussion upfront and eliminate all confusion about the multi-layer subject.
At the Core, It is about Scaling & Building Better Products
As we all know, ‘scaling’, which is the steadier increase in the system throughput rate, is an important metric to differentiate among blockchains.
Measured in TPS (transactions per second), scaling of the network directly influences the futuristic scope of hosting more dapps, assuring network security and other functions.
For example, the throughput rate in terms of TPS is used in VISA’s Visanet electronic payment network.
It can currently process more than 24,000 transactions and is often used as an industry benchmark to understand the performance of blockchain networks.
Shockingly, the first blockchain, bitcoin, could process not more than 7 transactions per second.
The Blockchain Trilemma
As already mentioned, scaling is an important differentiator that has led to a common notion in the blockchain industry.
Known as the blockchain trilemma, it states that the perfect blockchain is secure, scalable, and decentralized and that no one blockchain can deliver on all three parameters.
This means that a blockchain would most likely fall short on at least one of the 3 metrics.
This is the motivation behind so many solutions coming up across the layers.
For example, Ethereum may offer a higher degree of decentralization while Solana offers faster TPS. That’s just the tip of the iceberg. Blockchain trilemma is an important topic and raises many important questions.
We have discussed the blockchain trilemma in detail. Read Here.
Layer 0, Layer 1 and Layer 2
The blockchain industry refers to the Open System Interconnection Reference Model (OSI Model) that re-categorizes the standard 6 layers into 3 layers. From bottom to top, these are known as Layer 0, Layer 1 and Layer 2 blockchains.
What is Layer 0 Blockchain?
The bottom-most layer in the OSI model, layer 0 is the data transfer layer. It does the integration of blockchain networks with traditional networks.
The layer 0 scaling solutions do not make any changes to the core blockchain. Rather, they retain the original structure and the community rules with a focus on performance improvements.
A classic example is the Polkadot blockchain which is addressing the interoperability limitations of existing blockchain networks. Polkadot’s mainnet works as a ‘relay chain’ between two parachains (blockchains) while providing a secured & seamless exchange between the two.
Furthermore, on top of Polkadot, several applications can connect to a layer 1 blockchain such as Ethereum.
What is Layer 1 blockchain?
Next, in the blockchain network’s logical architecture, layer 1 includes the data layer, network layer, consensus layer, and the activating layer from the traditional OSI model.
Also known as, the On-Chain Scaling, a layer 1 blockchain refers to the scaling solution over the blockchain’s core protocol.
Popular examples include Ethereum, Ripple, Solana, Algorand, and others. They have their consensus mechanisms.
Layer 1 blockchains usually suffer from scaling issues and the entire debate of blockchain trilemma revolves around them the most.
Since they are hugely popular, the growing traffic is surpassing the network’s core capacity to accommodate such a volume of transactions. This increasing workload is slowing the overall network.
The relatively slow and complicated proof-of-work consensus algorithm is a barrier to widespread adoption. It is more secure but falls short of the limitations of slow transaction speed.
Ethereum, for example, has a huge community but does not fit the needs of the users in web 3.0.
As a result, the blockchain is already in the process of migrating to a proof-of-stake consensus algorithm.
What is Layer 2 blockchain?
Next, layer 2 includes the contract layer and the application layer of the blockchain architecture.
Here, the underlying protocols and policies of the blockchain cannot be altered while building the solution.
Here, the sidechains and other state channels scale the transaction speed.
A layer 2 blockchain rests on top of a layer 1 blockchain network that provides customized scalability, availability and smart contracting rules.
It inherits security and decentralization from the underlying layer 1 blockchain only. A few common examples of layer 2 solutions include the Sidechains, Plasma, Rollup, and State Channels.
The best example of a layer 2 blockchain is Polygon. It is a sidechain deployed on top of a layer 1 blockchain Ethereum.
It addresses the scalability issue in the underlying blockchain and charges lower gas fees.
While we are at it, it is important to mention layer 3 blockchains as well. These are the actual consumer applications with a variety of real-world applicability.
The best example here would be the DeFi dapps that let the consumers lend, borrow, and trade crypto money. Decentralized NFT marketplaces are another example.
Start Your Blockchain Development Project
More solutions across layers is a good thing for the business. More blockchains, more scalability solutions, and more dapps will ensure a speedier adoption of decentralization among the masses.
To be able to stay relevant in the era of web 3.0, businesses ought to embrace blockchain and cater to their customers efficiently.
Antier Solutions, as a leading blockchain development company, owns valuable experience in building solutions for layer 1, layer 2 and layer 3 blockchains.
Do you have a blockchain product in mind? Let’s discuss it.
