Breaking Down The Differences: Layer 1 and Layer 2 Solutions

In the crypto space, “Layer 1” and “Layer 2” are familiar terms often used by crypto enthusiasts. As simple as those words may sound, the architecture behind it is relatively complex for newbie users to fully grasp. So what exactly are they and how do they function?

The widespread adoption of cryptocurrency and blockchain is quite impressive, but it has given rise to the issue of scalability, especially in relation to transaction speed. Ethereum’s co-founder, Vitalik Buterin described the concept behind this challenge as the “Blockchain Trilemma”. Some of the ideas and techniques proposed by teams of developers, includes a multi-layer solution to tackle the scalability debate. However, which is the better solution, between Layer 1 and Layer 2 networks?

Layer 1 vs Layer 2

Layer 1 refers to the primary main network blockchain architecture that acts as a base or framework for other applications or networks to build on. In contrast, Layer 2 is the secondary blockchain that operates on top of the underlying Layer 1 blockchain. The purpose of Layer 2 networks is to improve the functionality of Layer 1 networks, in terms of efficiency, transaction fees and scalability. Layer 2 solutions make use of off-chain networks, to share the transaction and processing workload from the main blockchain, which in turn, improves scalability and utilises less gas fees.

Examples of Layer 1 networks are first generation blockchains such as Bitcoin, Ethereum, and Litecoin. Meanwhile, some of the prominent Layer 2 solutions include Bitcoin’s Lightning Network, Polygon, Arbitrum, and Plasma.

In summary, the core function of Layer 1 is to provide security and record of transactions, while Layer 2 projects sit on top of Layer 1 and provide numerous functions and benefits.

As the adoption of cryptocurrency increases by the day, it is critical to find lasting and workable solutions to address these challenges affecting the Layer 1 network.