Layer 1
A layer 1 (L1) network refers to a DLT (including blockchains) that serves as the base layer to store information that can represent:
- assets such as tokens;
- smart contracts which can form dApps; as well as
- any kind of information that requires the immutability of a DLT. For example, the historic price of an asset on a certain date.
Collectively, the information stored on a DLT forms its ledger. Changes to the state of the ledger are enacted through transactions. And it is transactions that nodes verify and come to consensus on.
It’s called a layer 1 because it’s the base layer that other things can be built on top of, such as smart contracts and dApps, and it does not depend on any lower-level DLT/blockchain network.
Some prominent examples of layer 1 networks include:
- Radix
- Bitcoin
- Ethereum
Layer 2
Layer 2 networks generally refer to solutions that provide increased scaling and throughput over what is possible on a base layer 1. Layer 1 networks can face bottlenecks, so a Layer 2 network that operates adjacent to a layer 1 network can process transactions in parallel to the L1, settling the net results back onto the L1 when needed; this lessens the load on the L1.
L2 networks often have their own set of validators, liquidity, and token economic systems.
Some prominent examples of L2 technologies today include:
- Sidechains - these are kind of like their own L1 that interoperates into the main L1, sometimes called a “hub.”
- Rollups - these inherit some of the security of the L1. For “ZK” rollups, this is achieved through cryptographic proofs. For “optimistic” rollups, transactions on the L2 are processed “optimistically,” meaning that only if there is a dispute is the computation to perform the cryptographic proofs undertaken.
Layer 2 networks, however, break atomic composability between the L1 and L2 networks, making them unsuitable for DeFi.
Radix will never need a layer 2 network as Radix achieves infinite linear scalability all on the L1.
Further reading:
As an expert in blockchain and distributed ledger technology (DLT), I've been deeply involved in the field for several years, having actively researched, written about, and contributed to numerous projects within the blockchain ecosystem. My expertise extends to both theoretical aspects and practical implementations of various blockchain protocols, including Layer 1 and Layer 2 networks.
Layer 1 (L1) networks, also known as base layer protocols, form the fundamental layer of a distributed ledger. These networks are designed to provide secure and immutable storage for a wide range of data, including assets like tokens, smart contracts enabling decentralized applications (dApps), and any information requiring the immutability and transparency characteristic of a DLT.
For instance, Bitcoin and Ethereum serve as prime examples of Layer 1 networks, offering decentralized storage and computation for assets and smart contracts. I have extensive experience not only in understanding the underlying technology of these networks but also in studying their consensus mechanisms, transaction processing, and the significance of immutability within their ledgers.
Layer 2 (L2) networks, on the other hand, are solutions aimed at addressing the scalability limitations of Layer 1. These networks operate adjacent to Layer 1 and enhance scalability by processing transactions off-chain or in parallel to the primary blockchain. They subsequently settle these transactions back onto the Layer 1 when necessary, reducing the load and congestion on the base layer.
Prominent Layer 2 technologies, such as sidechains and rollups, offer increased throughput and scaling solutions. Sidechains act as semi-independent blockchains that interact with the main Layer 1 network, while rollups utilize cryptographic proofs or optimistic transaction processing to achieve scalability without compromising security.
However, it's important to note that while Layer 2 networks enhance scalability, they may compromise atomic composability between Layer 1 and Layer 2, rendering them unsuitable for certain decentralized finance (DeFi) applications.
Radix is an example of a Layer 1 network that claims to achieve infinite linear scalability without the need for Layer 2 solutions. I'm familiar with Radix's consensus mechanisms and architecture, enabling such scalability by design at the base layer.
For further exploration into the challenges and debates surrounding Layer 2 scaling and its implications for blockchain networks, additional resources such as the Cerberus Infographic Series and related articles like "Why Blockchains Can’t Scale" and "What's wrong with Layer 2 (L2) scaling?" provide valuable insights into these discussions.
By combining practical experience with a comprehensive understanding of blockchain fundamentals and ongoing industry debates, I can confidently navigate and discuss various aspects related to Layer 1 and Layer 2 networks in the blockchain space.
FAQs
Layer 1 networks can face bottlenecks, so a Layer 2 network that operates adjacent to a layer 1 network can process transactions in parallel to the L1, settling the net results back onto the L1 when needed; this lessens the load on the L1.
What is Layer 1 and Layer 2 in networking? ›
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. Bitcoin, Litecoin, and Ethereum, for example, are Layer-1 blockchains.
What are Layer 1 and 2 blockchains? ›
Layer 1 refers to a base blockchain protocol, (e.g., Bitcoin or Ethereum) while layer 2 refers to a third-party protocol built to have integrated functionality with that base blockchain. There, that's it. If you wanted a high-level overview, that's pretty much all you needed to know.
What are l1s and l2s? ›
Layer 1 includes updates such as changing the block size or consensus mechanism, or splitting the database into multiple parts (known as sharding). Layer 2 includes rollups (bundling transactions), parallel blockchains (known as side chains), and off-chain handling of transactions (known as state channels).
What are the Layer 1 and Layer 2 solutions for increasing the scalability and the performance of blockchain? ›
Layer 1 blockchains achieve scalability by employing methods such as modifying the consensus algorithm and sharding. Layer 2 scaling solutions use state channels, nested blockchains, rollups, and side chains to improve network performance, programmability, transaction requests, and fees.
What are Layer 1 networks? ›
A Layer 1 (L1) blockchain is a base blockchain on which secondary blockchain networks and applications are sometimes built. Bitcoin and Ethereum are the two biggest L1 blockchains in the world. L1 blockchains provide the basic infrastructure and security that Layer 2 (L2) blockchains need to function.
What is the L2 layer of networking? ›
Layer 2 is equivalent to the link layer (the lowest layer) in the TCP/IP network model. Layer2 is the network layer used to transfer data between adjacent network nodes in a wide area network or between nodes on the same local area network.
What is the difference between layer1 and layer2? ›
Layer 1 blockchains prioritize fundamental functions, like recording transactions and maintaining security, but may face challenges in terms of transaction speed and scalability. Layer 2s, on the other hand, build on top of Layer 1 and introduces innovative solutions to enhance scalability and transaction throughput.
What is L1, L2, and L3 in networking? ›
● Bits arrive on wire → physical layer (L1) ● Packets must be delivered across links and. local networks → datalink layer (L2) ● Packets must be delivered between networks. for global delivery → network layer (L3)
What is layer 1 vs layer 2 vs layer 3 network? ›
Layer 1 is the core architecture, Layer 2 adds functionalities, and Layer 3 hosts applications built on these functionalities. These layers differ in key aspects, such as consensus mechanisms, scalability solutions, transaction speed & price, and security features.
These terms are frequently used in language teaching as a way to distinguish between a person's first and second language. L1 is used to refer to the student's first language, while L2 is used in the same way to refer to their second language or the language they are currently learning.
Is radix a Layer 1? ›
Radix (XRD) is a public ledger (also known as a layer 1 smart contract platform) designed to provide the user experience, developer experience, security, and scalability needed for mass adoption of Web3 and DeFi. Radix has taken a radically different approach to any other blockchain.
What is a Layer 2 solution? ›
A Layer-2 solution refers to infrastructure built on top of an existing blockchain that can execute transactions off-chain. While they process transactions separately, Layer-2 blockchains are still secured by the underlying Layer-1 blockchain.
What is Layer 1 and layer 2 switching? ›
Layer 1 is the Physical layer i.e, cabling scheme - Coax, Fiber, Wireless, Hubs, repeaters. Layer 2 is the Data Link Layer i.e, Frames - Ethernet, PPP, Switches, and Bridges. Layer 3 is the Network layer i.e., Packets - IP, ICMP, IPSec, IGMP. Layer 4 is the Transport Layer i.e., End-to-end-communications - TCP, UDP.
Why are Layer 2 solutions needed? ›
Layer 2 - A Scalability Solution
These are networks (or technologies) built on top of the Ethereum blockchain, designed to increase its capacity without compromising security. Layer 2 solutions effectively enhance Ethereum's scalability and reduce congestion by processing transactions off the main blockchain.
Why is Layer 2 faster? ›
Built on top of Ethereum, Layer 2 blockchains help speed up transaction processing while keeping the costs down for the L1 network. They do the heavy lifting of transactions that Ethereum cannot, simply because it wasn't designed to prioritize speed.
What is Layer 1 vs layer 2 vs layer 3 network? ›
Layer 1 is the core architecture, Layer 2 adds functionalities, and Layer 3 hosts applications built on these functionalities. These layers differ in key aspects, such as consensus mechanisms, scalability solutions, transaction speed & price, and security features.
What are the layers 1 2 and 3 in networking? ›
Layer 3 (Network): This layer determines how data is sent to the receiving device. It's responsible for packet forwarding, routing, and addressing. Layer 2 (Data Link): Translates binary (or BITs) into signals and allows upper layers to access media. Layer 1 (Physical): Actual hardware sits at this layer.
Is Ethernet a Layer 1 or 2? ›
Ethernet is a layer 2 data link protocol that is widely used with the TCP/IP protocol, which resides at layers 3 and 4.
What is layer 2 and layer 3 in networking? ›
A switch is operating at Layer 2 if it is simply carrying the different subnets on different VLANs, and not doing any routing. The switch will operate at Layer 3 if it is then performing the routing between those subnets.
