Differences Between Blockchain Levels
In the crypto industry, various blockchain solutions are categorized by levels, each serving a distinct purpose.
The Blockchain Trilemma
The trilemma is a theorem addressing the fundamental challenge of scaling networks. It states that a network has three primary characteristics: decentralization, security, and performance.
A blockchain can achieve only two of these three characteristics, necessitating a compromise on one. Developers use different levels to overcome this "compromise" and integrate all three characteristics within a single product. These levels are referred to as Layer 0, 1, 2, and 3.
Layer 1
Layer 1 includes independent blockchains like Bitcoin, Ethereum, and TON, which can process transactions on their own but encounter the trilemma.
Layer 0
Layer 0 is intended for interoperability between blockchains, facilitating asset transfers and simplifying application development across various blockchains. Examples include Polkadot and Cosmos.
Layer 2
Layer 2 introduces third-party solutions to Layer 1, targeting specific trilemma issues, usually scalability. Technologies include state channels, nested blockchains, rollups, and sidechains, such as Arbitrum and Optimism for Ethereum.
Layer 3
Layer 3, or the application layer, encompasses decentralized applications and protocols. Notable examples are Uniswap and Orbs.