When the encryption industry became an important matter in the financial field and the global economy, the traditional blockchain technology came under the microscope of developers. Can it accommodate all the expansions required to keep up with the huge amount of transactions and transformations on them and create solutions, and since scalability and security are not important? The power of the blockchain technology has been clouded by many initiatives that have emerged in order to expand the blockchain and maintain its security. Examples of this include the first layer, Layer 1, and the second layer, Layer 2, in the blockchain technology. From this topic, we will learn about what the first layer and the second layer are. How it works?
What are the first and second layer of block chains?
If you have been part of the cryptocurrency world for a short time, you must have heard the terms Layer 1 (L1) and Layer 2 (L2). Layer 1 blockchains are sovereign consensus architectures such as Bitcoin, Ethereum, and Cosmos. For example, Onomy Protocol is a layer-one blockchain based on Cosmos that operates with independent consensus and its own validators.
The second layer blockchain is its own separate chain with its own consensus structure, but it is linked to the first layer. It handles the offload of transactions off the main chain it supports and then feeds verifiable data to that main chain to finalize and integrate recorded transactions.
Layer 1 refers to the basic level of the blockchain architecture. It is the main structure of the blockchain network. Bitcoin, Ethereum, and BNB Chain are examples of layer-one blockchains. The second layer refers to networks built on top of other blockchains. So, if Bitcoin is the first layer, the accelerator network running on top of it is an example of the second layer.
Blockchain network scalability improvements can be classified into Layer 1 and Layer 2 solutions. Solving the first layer will directly change the rules and mechanisms of the original blockchain. A layer 2 solution will use a parallel external network to facilitate transactions away from the main network.
Layer 1 and Layer 2 blockchain scaling solutions are generally improvements to the throughput, or processing speed, of any cryptocurrency blockchain network. They can include protocol updates or additional network solutions to help process more transactions.
The first layer includes updates such as changing the block size or consensus mechanism, or dividing the database into multiple parts (known as sharding). The second layer includes pooling operations (pooling transactions), parallel block chains (known as sidechains), and off-chain transaction handling (known as state channels).
How do the two layers work and their expansion solutions?
Let us explain to you how the two layers work and their scaling solutions
The first layer of the blockchain is the infrastructure of the decentralized cryptocurrency network. Examples of layer-one blockchains include Bitcoin, Ethereum, and Cardano. These blockchains handle cryptocurrency network processing and security through a common consensus mechanism, such as Proof of Work (PoW) or Proof of Stake (PoS).
As for the second layer blockchain, it refers to the network protocols that are placed in the layers above the first layer. Layer 2 blockchain protocols use Layer 1 for network infrastructure and security, but are more flexible in their ability to scale transaction processing and overall throughput on the network. Examples include the Polygon system (which is layered on top of Ethereum) and the Bitcoin Lightning network. Coinbase has launched the Base Network, a layer 2 Ethereum network.
The expansion capacity of the two networks
There are many options available for layer 1 blockchains that can increase throughput and overall network capacity. In the case of blockchains that use Proof of Work, moving to Proof of Stake could be an option to increase transactions per second while reducing processing fees. However, there are conflicting views in the cryptocurrency community regarding the benefits and long-term implications of Proof of Stake.
Scaling solutions on Layer 1 networks are usually provided by the project development team. Depending on the solution, the community will need a hard or soft fork of the network. Some small changes are backward compatible, such as updating Bitcoin SegWit.
Larger changes, such as increasing the Bitcoin block size to 8MB, require a hard fork. This creates two versions of the blockchain, one with the update and one without. Another option to increase network throughput is segmentation. This splits blockchain operations across several smaller partitions that can process data simultaneously rather than sequentially.
Layer 2 solutions require reliance on secondary networks that operate independently or in parallel with the main chain.
Among these solutions:
Off-chain groups
Off-chain pools collect layer 2 transactions off the main chain and present them as a single transaction on the main chain.
Proof of validity is used to verify the integrity of transactions.
Assets are held on the original chain through a bridging smart contract, combining the security of the native network with the benefits of less resource consumption.
Sidechains
Sidechains are independent blockchain networks with their own sets of validators.
Users must trust that the sidechain is working properly because it is able to control the assets on the original chain.
State channels
Status channels represent a two-way communication environment between transacting parties.
It locks down part of the underlying blockchain and connects it to a channel for off-chain transactions.
It performs transactions off-chain without immediately sending the transaction data to the original chain.
Interoperable blockchains
It relies on a set of secondary chains located on top of the main âoriginalâ block chain.
Subchains return processed transactions to the main chain when they are finished.
Scaling blockchain technology is important for mass adoption and increasing cryptocurrency network capacity. Layer 1 and Layer 2 scaling solutions help maintain the integrity of the underlying blockchain, while improving the ability to handle more transactions. But there are inherent risks that can jeopardize the security of a particular blockchain â or even the integrity of the project as a whole.
