Blockchain Layers: Difference between Layer 1 and Layer 2
If you want to understand the Blockchain Layers or know the difference between layer 1 and layer 2, this article will benefit you.
Blockchain technology continues to grow and expand to accommodate new applications, increasing the volume of transactions and thus improving the system’s production rate.
The difference between layer 1 and layer 2 is often talked about as part of blockchain development.
Blockchain layers were created to improve network security and record-keeping.
In this article, we will learn how these systems work to improve operation between blockchains.
What is the concept of blockchain trilemma?
The concept refers to the scalability of a blockchain network based on its adherence to three main principles:
- Security
- Decentralization
- Scalability
The triadic idea explains that a blockchain only has two properties, not three, at a time, so it needs to give up one of its properties in exchange for its ability to perform its functions.
An example of Bitcoin is when the network improved decentralization and security and then started planning to improve scaling.
No cryptocurrency contains all three features, but priority is given to two features at the expense of the third.
So many developers are working to solve this problem with techniques and ideas that focus on solving the network expansion problem. With this implementation, some concepts and techniques, such as layer 1 and 2 solutions, emerge.
A wide range of cryptocurrencies can process thousands of transactions per second but this conflicts with decentralization and security.
Noting that Bitcoin and Ethereum are among the safest and most decentralized digital currencies.
Cordano, Avalanche, and Solana are layer 1 cryptocurrencies made famous by the scaling issues found in Bitcoin and Ethereum.
Sizing solutions for Blockchain Layer 1
We first know the definition of the blockchain layer 1, as it refers to the protocol for establishing the network.
Layer 1 scaling solutions enhance this layer to facilitate scalability in a variety of ways.
It can make direct modifications to the protocol rules to increase the speed and capacity of transactions.
Layer 1 solutions can also provide greater capacity to accommodate additional data for users.
Changes to the consensus protocol and hashing are essential modifications to achieve scaling at Layer 1 on blockchain networks.
Some consensus mechanisms such as Proof of Stake may be more efficient than Proof of Work protocols.
The sharding protocol also makes it easier to distribute the network workload across a data set or multiple shards.
Blockchain Layer 1 Pros and Cons
Pros
- Scalability is the most obvious advantage of Layer 1 blockchain solutions as these solutions require modification of the protocol to improve scalability.
- The Layer 1 protocol provides decentralization and security with high scalability and economic feasibility.
- The development of the ecosystem is fostered by new tools, technological developments, and other variants of the underlying protocols.
Cons
- The inability of layer 1 networks to scale has been a problem as Bitcoin and other blockchains have tried to work to process transactions during times of high demand. The proof of work or consensus mechanism used by Bitcoin also requires a large number of computational resources.
What is the solution to layer 1 problems?
Fundamental blockchain updates are required to achieve Layer 1 network scaling and include:
1. Improvements to the consensus protocol
Some consensus mechanisms are more efficient than others, such as the Proof of Work consensus protocol on blockchain networks like Bitcoin for its security.
However, it is slow, which is why Proof of Stake is the preferred mechanism for most new blockchain networks.
Proof of stake does not require miners to solve cryptographic algorithms that use a lot of computing power so network participants use POS to process and verify transaction blocks.
Ethereum will move to Proof of Stake to increase network capacity while promoting decentralization and maintaining network security.
2. Segmentation
Segmentation is based on the concept of distributed databases, which have become one of the most popular solutions, and segmentation or division of the network into separate sets of data called shards to be easier to handle than searching for all nodes.
The network processes parts in parallel, allowing sequential processing of multiple transactions, in addition to assigning each network node to a specific part instead of maintaining a complete copy of the blockchain.
Each shard sends directories to the main chain, addresses, states, and balances to other shards using cross-shard communication systems. Among the most famous models:
Sizing solutions for Blockchain Layer 2
These solutions use networks and technologies that run on top of the blockchain protocol, where an off-chain protocol or network aids scalability and efficiency.
This is done by transferring transactions off-chain and then notifying the blockchain of the transaction’s outcome.
Through this, data processing tasks are delegated more efficiently and flexibly, and the blockchain is not put under pressure.
The Lightning Network is one of Bitcoin’s scaling solutions and a popular example of a Layer 2 solution along with many others you’ll find when comparing Layer 1 to Layer 2.
Blockchain Layer 2 Pros and Cons
Pros
- It does not affect network performance or basic blockchain functions.
- Some of them make small transactions faster because they are not subject to verification or unnecessary fees like other transactions.
Cons
- There is a negative impact on communication between different blockchain networks, as it is not possible to communicate with someone on Ethereum when you use Bitcoin. This can lead to a restriction of communication, as Layer 2 users are limited to only the protocols of the solutions they use.
- Privacy and Security: It does not provide the level of security that main chains do, so it is up to the user’s priorities.
What is the solution to Blockchain layer 2 problems?
Cross-blockchains, state channels, and sidechains are examples of layer 2 solutions.
Overlapping blockchain
The term refers to a blockchain on top of another blockchain and usually one of them is essential for establishing parameters for a more extensive network and executing operations within an interconnected network of secondary chains.
In addition to the main chain, several blockchain layers can be built that connect, so that the parent chain delegates tasks to the sub-chains, then completes them and returns the results to the parent.
The main blockchain does not participate in the network functions of the subchains except to intervene to resolve conflicts within the network, which reduces the processing load on the main chain and improves scalability.
The OMG Plasma project demonstrates the infrastructure of a layer 2 cross-chain blockchain model that is used on top of the layer 1 Ethereum protocol.
State channels solution
It refers to the second-way connection between the blockchain and off-chain transaction channels which enhances the capacity and speed of transactions.
However, it does not verify authenticity through the layer 1 network but rather acts as an isolated neighbor resource via smart or multi-signature contract mechanisms.
Upon completion of transactions, the final state of the channel and its changes are written on the blockchain.
These channels include Liquid Network, Ethereum Raiden Network, and Bitcoin Lightning Network.
Sometimes these channels forego decentralization to increase scalability.
Side chains
A sidechain represents a chain of transactions adjacent to a blockchain and is typically used in bulk transactions where the chain uses a consensus mechanism independent of the main chain.
Users can improve it through speed and scalability, and the main function of the main chain is to maintain public security, verify the authenticity of the aggregate transaction history, and resolve disputes.
Side chains differ from state chains in that side transactions are not private between participants but are recorded publicly on the blockchain.
Sidechain security breaches do not affect the main or other sidechains.
The sidechain is usually built from the ground up, so creating it requires a lot of effort.
What are the differences between Blockchain Layers: layer 1 and layer 2?
Key differences between Layer 1 and Layer 2 solutions include:
1. The definition
Layer 1 solutions modify the core layer of the blockchain protocol to achieve desired improvements such as compressing the block size to accommodate more transactions or changing consensus protocols to improve speed and efficiency.
As for Layer 2, off-chain solutions share the load of the underlying blockchain protocol, where processing tasks for information and transactions are delegated to the Layer 2 protocol, networks, or applications by the main network of the blockchain protocol.
When off-chain protocols or solutions are completed, the result is reported to the main blockchain layers.
2. How to operate
Layer 1 focuses on modifying the underlying protocol using scaling solutions, which change the blockchain protocols.
So the user will not be able to reduce these adjustments when the transaction volume decreases.
Compared to Layer 2 scaling solutions, these solutions operate independently off-chain, meaning they refer to the final results required by the real-time blockchain protocol.
3. Types of solutions
Consensus protocol optimization and hashing are the most popular types of layer-one solutions.
Sizing this layer includes adjustments to the block size or block generation speed to ensure the desired functionality.
As for layer 2 scaling solutions, there are no restrictions that can be implemented, as any protocol, network, or application can work as layer 2 off-chain solutions for blockchain networks.
4. The quality
Layer 1 networks act as the ultimate source of information as they are responsible for settling transactions.
On these networks, a unique token is used to access network resources, in addition to the innovation in designing the consensus mechanism.
But Layer 2 networks provide the same functionality as a Layer 1 blockchain plus additional features such as enhanced throughput, programmability, and reduced transaction costs.
Each solution has its way of reassigning transactions to the underlying layer.
What is the future expansion of the network? (blockchain layers)
Scalability poses an issue in achieving widespread crypto acceptance as demand for cryptocurrencies increases so will demands to expand blockchain platforms.
There are costs and benefits to Layer 1 and Layer 2 solutions so the future will include a combination of these solutions.
If you would like to understand more about the technical concepts behind scaling a blockchain network, head over to the BitcoSAT Telegram group to benefit from the expertise of the crypto community.
