The Backbone of Blockchain: A Deep Dive into Layer 1 Protocols | Dex-Trade Academy

1. Introduction

2. What is layer 1?

3. Layer 1 scaling

4. What is layer-1 sharding?

5. Layer 1 vs. Layer 2

6. Layer 1 blockchain examples

7. Closing thoughts

 

Introduction

Blockchain technology is a complex and multifaceted field, and layer 1 and layer 2 are crucial concepts that underpin much of its architecture. Understanding the differences between these layers is essential for anyone looking to explore blockchain and cryptocurrency. At a high level, layer 1 refers to the base blockchain protocol, which processes and finalizes transactions on its own blockchain. Layer 2, on the other hand, is built on top of layer 1 and relies on it to finalize transactions.

In this article, we'll take a closer look at layer 1, exploring its properties, limitations, and examples. We'll also delve into layer 1 scaling, which is one of the most pressing issues facing blockchain developers today. Finally, we'll examine layer 1 sharding, a technique that can help improve blockchain performance by partitioning the network into smaller, more manageable parts.

 

What is layer 1?

Layer 1 is the foundation of a blockchain protocol, and it is where the majority of transaction processing occurs. Some popular examples of layer 1 protocols include Bitcoin, Ethereum, and Solana. These networks have their own native token, which is used to pay transaction fees and secure the network.

One of the defining features of layer 1 is that it is a standalone blockchain protocol, meaning that it does not rely on other protocols to function. This allows it to provide high levels of security, decentralization, and trustlessness. At the same time, however, layer 1 is also subject to certain limitations, such as scalability issues. For example, Bitcoin can only process a limited number of transactions per second, which can cause delays and increased fees during times of high network traffic.

Despite its limitations, layer 1 is a critical component of blockchain technology. It is the bedrock upon which all other blockchain protocols are built, and it provides the security and trust that are essential for any decentralized system to function.

 

Layer 1 scaling

Scalability is one of the most pressing issues facing blockchain developers today. As the popularity of cryptocurrencies and blockchain applications continues to grow, the limitations of layer 1 protocols are becoming increasingly apparent. One of the most significant challenges facing layer 1 is its limited capacity to process transactions.

Bitcoin, for example, can only process around seven transactions per second, while Ethereum can handle approximately 15 transactions per second. This may be sufficient for some applications, but it is not enough to support the widespread adoption of blockchain technology. To address this issue, developers are exploring a range of layer 1 scaling solutions.

Increasing block size is one potential layer 1 scaling solution. By increasing the size of each block, more transactions can be processed simultaneously, which can help to reduce delays and lower fees. Changing the consensus mechanism is another possible solution. Proof of Stake (PoS) is an alternative consensus mechanism that requires less computational resources than Proof of Work (PoW), the consensus mechanism used by Bitcoin. Ethereum is currently in the process of transitioning from PoW to PoS, which is expected to significantly improve its scalability.

 

What is layer-1 sharding?

Sharding is a popular layer-1 scaling solution used to increase transaction throughput. The technique is a form of database partitioning that can be applied to blockchain-distributed ledgers. A network and its nodes are divided into different shards to spread the workload and improve transaction speed. Each shard manages a subset of the whole network's activity, meaning it has its own transactions, nodes, and separate blocks.

With sharding, there is no need for each node to maintain a full copy of the entire blockchain. Instead, each node reports back the work completed to the main chain to share the state of their local data, including addresses’ balance and other key metrics. This reduces the computational burden on the network and makes it possible to achieve faster transaction times.

One example of a layer-1 sharding solution is Zilliqa. Zilliqa is a high-performance blockchain platform that uses a sharded architecture to increase transaction throughput. The platform can process up to 2,828 transactions per second (TPS) in its current form. Its unique feature is its use of the Practical Byzantine Fault Tolerance (PBFT) consensus algorithm, which ensures that the network remains secure even in the presence of bad actors.

 

Layer 1 vs. Layer 2

When it comes to improvements, not everything is solvable on layer 1. Due to technological constraints, certain changes are difficult or almost impossible to do on the main blockchain network. Ethereum, for example, is upgrading to Proof of Stake (PoS), but this process has taken years to develop.

Some use cases simply cannot work with layer 1 due to scalability issues. A blockchain game could not realistically use the Bitcoin network due to lengthy transaction times. However, the game may still want to use layer 1's security and decentralization. The best option is to build on top of the network with a layer-2 solution.

Lightning Network is one of the most famous examples of a layer-2 solution. The Bitcoin network under heavy traffic can take hours to process transactions. The Lightning Network lets users make speedy payments with their Bitcoin off the main chain, and the final balance is reported back to the main chain later. This essentially bundles everyone's transactions into one final record, saving time and resources.

 

Layer 1 blockchain examples

Now that we know what layer 1 is, let's look at some examples. There's a huge variety of layer-1 blockchains, and many support unique use cases. It's not all Bitcoin and Ethereum, and each network has different solutions to the blockchain technology trilemma of decentralization, security, and scalability.

One example of a layer-1 blockchain that is gaining popularity is the Solana blockchain. It is a high-performance blockchain that uses a Proof of History (PoH) consensus mechanism, which allows it to process up to 65,000 transactions per second (TPS). The Solana blockchain is designed for decentralized applications and enables developers to build scalable applications with high transaction throughput.

Another example is the Binance Smart Chain (BSC), a layer-1 blockchain created by Binance. BSC is a high-performance blockchain that is compatible with the Ethereum Virtual Machine (EVM). This compatibility makes it easy for developers to migrate their Ethereum-based decentralized applications (dApps) to BSC. The blockchain uses a Proof of Staked Authority (PoSA) consensus mechanism, which allows it to process up to 100 transactions per second (TPS).

 

Closing thoughts

In conclusion, layer-1 protocols are the backbone of the blockchain ecosystem. They provide the foundation for blockchain technology and are responsible for its primary functions. However, layer-1 protocols have their limitations, especially when it comes to scalability.

Layer-2 solutions are built on top of layer 1 to address these limitations and provide additional features. Together, layer 1 and layer 2 solutions form a robust and versatile blockchain ecosystem that is capable of supporting a wide range of use cases and applications.

As the blockchain industry continues to evolve, it is likely that we will see new layer-1 protocols and layer-2 solutions emerge. Understanding the differences between these layers and their respective technologies will be crucial for developers, investors, and users alike.