In the world of cryptocurrencies, there are multiple layers that can be better understood if we break the ecosystem down into different levels. Here is a brief explanation of each layer:
1. Layer 1:
- It represents the basic infrastructure on which cryptocurrencies and decentralized applications (DApps) are built.
- The most famous examples: Bitcoin ($Bitcoin), Ethereum ($Ethereum), and Solana ($Solana).
The functions of this layer include executing transactions and securing the network.
2. Layer 2:
- Aims to improve the performance and capacity of the first layer through techniques such as scaling solutions.
- Reduces the pressure on the first layer by processing transactions off the main chain and then settling them on the main chain.
Examples: Lightning Network for Bitcoin, Polygon for Ethereum.
3. Layer 3:
- Includes protocols and tokens built on top of layers 1 and 2.
- Includes decentralized applications and services that use the underlying infrastructure.
Examples: DeFi (decentralized finance) applications like Uniswap, and NFTs (non-fungible tokens) like OpenSea.
4. Layer 4:
- Includes user interfaces and services that enable interaction with lower layers.
- Includes digital wallets, payment gateways, and trading exchanges, which facilitate access to the cryptocurrency ecosystem.
Examples: MetaMask, Coinbase, Binance wallets.
These layers allow for a deeper understanding of how the cryptocurrency ecosystem is built and provides an infrastructure that supports innovation and development.
