In the world of cryptocurrencies, the terminology 'Layer 1 coins' and 'Layer 2 coins' is actively used, but not always correctly understood. Let's explore the main differences between these two types of crypto assets, their functions, examples, and significance in the blockchain ecosystem.

What are Layer 1 coins?

Layer 1 coins are cryptocurrencies that are the core assets of blockchain platforms. They power the blockchain, including consensus functions, network protection, and transaction processing. Such coins are usually used to pay for transaction fees and execute smart contracts.

Examples of Layer 1 coins:

  1. Bitcoin (BTC)

    • Market: The first cryptocurrency in the world, used as digital gold.

    • Market Capitalization: $750 billion (November 2024).

    • Daily Trading Volume: about $25 billion.

    • Main Goal: decentralized means of saving and payments.

  2. Ethereum (ETH)

    • Market Capitalization: $525 billion.

    • Daily Trading Volume: $8 billion.

    • Role: foundation for smart contracts and decentralized applications (dApps).

  3. Solana (SOL)

    • Market Capitalization: $14 billion.

    • Feature: high throughput (up to 65,000 transactions per second).

  4. BNB (Binance Coin)

    • Market Capitalization: $43 billion.

    • Role: internal asset of Binance Smart Chain, widely used for DeFi and trading.

What are Layer 2 coins?

Layer 2 coins represent assets related to technologies built on top of Layer 1 blockchains. These coins utilize the infrastructure of the base blockchain to enhance scalability, speed, and reduce transaction costs.

Examples of Layer 2 coins:

  1. Polygon (#MATIC )

    • Base: operates on top of Ethereum to scale the network.

    • Market Capitalization: $12 billion.

    • Speed: up to 7000 transactions per second.

    • Application: allows for cheaper and faster launching of dApps.

  2. Optimism (#OP )

    • Function: scaling solution for Ethereum that reduces network load.

    • Market Capitalization: $2 billion.

    • Feature: applies optimistic rollup technologies to aggregate transactions.

  3. Arbitrum (#ARBİTRUM )

    • Role: improving Ethereum's scalability through optimistic rollups.

    • Market Capitalization: $1.8 billion.

    • Popularity: actively used for DeFi projects.

  4. Immutable X (#IMX )

    • Main Blockchain: Ethereum.

    • Market: solutions for NFTs and gaming.

    • Advantage: no transaction fees.

Application of Layer 1 coins

Layer 1 coins are essential for the operation of base blockchains. For example:

  • Bitcoin is used as a store of value and means of payment.

  • Ethereum has become the foundation for decentralized finance (DeFi), gaming, and NFTs.

Example: Ethereum Fees

The average transaction fee on Ethereum is around $5-7 under high load, making the use of Layer 2 coins, such as MATIC, relevant for cost reduction.

Application of Layer 2 coins

Layer 2 coins are actively used for scaling popular blockchains. For example:

  • Polygon (MATIC) integrates with Ethereum to launch gaming and NFT platforms with minimal costs.

  • Arbitrum (ARB) allows developers to launch applications with high transaction speeds while maintaining Ethereum's security.

Example: Saving time and money

According to a report from the Polygon team, using Layer 2 reduces transaction costs on Ethereum by an average of 95%, while processing speeds increase by several times.

Why is this important?

  1. Scalability Growth
    Layer 2 projects, such as Optimism and Arbitrum, allow Ethereum to maintain leadership in the DeFi and NFT sectors by addressing network congestion.

  2. Investment Attractiveness
    Layer 1 coins, such as BTC and ETH, remain the primary investment targets for large institutions. Layer 2 coins, like MATIC, are of interest to investors due to their technical potential.

  3. Future of the Ecosystem
    It is forecasted that the market capitalization of Layer 2 ecosystems could reach $200 billion by 2026, especially in the context of Web3 growth.