Layer 1 refers to the underlying blockchain protocol that directly secures and validates transactions, while Layer 2 refers to additional scaling solutions or protocols built on top of Layer 1 to improve scalability and transaction throughput.
Additional scaling solutions or protocols may be constructed on top of the primary blockchain protocol (Layer 1), which is responsible for direct transaction security and validation to boost scalability and transaction throughput. Layer 1, the rock upon which blockchain networks are built, may be located in one corner. On the other hand, Layer 2 is the answer to scalability since it is quick and effective. Which layer, however, will ultimately prevail?
Solution for Layer-1 Scalability
Another term for the entire blockchain technology is Layer 1. It is so-called because this is the primary framework that supports a network's operation. On-chain networking is a frequent name for layer-one scaling methods. Specifically, specific networks are called tier 1 since they own their currency and can execute transactions on their blockchains. In addition, layer 1 networks have the primary benefit of not needing any modification to their current design. Layer 1 blockchains provide a variety of alternatives in terms of the services offered by Layer 1 networks. They are higher network capacity and throughput. When considering blockchain technology that uses Proof of Work consensus, switching to Proof of Stake might allow them to boost their transaction throughput (TPS) while lowering transaction costs. The development team working on the project generally introduces the fixes for the scalability issues on Layer 1 networks. Backward compatibility is also included with minor updates like the SegWit upgrade for Bitcoin. More extensive modifications, like raising the block size limit for Bitcoin to 8 MB, need a hard fork. Sharding is a technique that divides blockchain network activities into more manageable chunks. The data processing can be done concurrently rather than sequentially, thanks to these smaller segments.
Solutions for Layer-2 Scaling
Layer 2 solutions, as we have established, need auxiliary networks that operate in tandem with or independently of the primary chain.
Rollups:The most popular zero-knowledge rollup combines many off-chain Layer 2 transactions into a single submission to the main chain. Validity proofs are used in these systems to ensure honest dealings. The smart contract verifies the rollup as operating, and assets are retained on the original chain through a bridging smart contract. It gives you the safety of the original network with streamlined consolidation efficiency.
Sidechains:As separate blockchain networks, sidechains have their validators. It indicates the main chain's bridge smart contract isn't checking the integrity of the sidechain. Since the sidechain may manage resources on the main chain, you must have faith that it is doing it appropriately.
The parties in a transaction may communicate in a state channel. To conduct off-chain transactions, the parties partition the underlying blockchain and link the partition to a third-party network. Typically, this is accomplished via a prearranged smart contract or multiple signatures. A transaction or set of transactions is then executed off-chain, with no immediate submission of transaction data to the underlying distributed ledger (i.e., the main chain).
After the group of transactions has been finalized, the channel's final "state" is sent to the blockchain for verification. This approach may speed up transactions and expand the network's capacity. Solutions based on state channels include Bitcoin's Lightning Network and Ethereum's Raiden.
Comparing the Layer 1 and Layer 2 Transactional Speed and Cost
These capabilities are crucial since consumers primarily care about transaction times and prices. The transaction fees and throughput of a layer1 blockchain are notoriously high. Verifying each transaction on each node of the network might be time-consuming. Prices rise since layer 1 can't keep up with the transaction demand. These issues are why layer2 blockchains were developed. In essence, they offload parts of a transaction off the main blockchain, easing the load on the network. Because of this, transaction validation times are reduced, and costs are reduced as well.
Taking Into Account The Consequences, Layer 2 Of The Blockchain, In-Between
When deciding between a Layer 1 blockchain and a Layer 2 blockchain, it's crucial to weigh the benefits of each. Layer 1 blockchains have the advantage of being very secure and decentralized, but they may have difficulty scaling and processing transactions quickly. However, Layer 2 blockchains may trade speed for decentralization and security. Blockchain technology's future is dynamic, with new developments constantly appearing. Layer two blockchains are the most widely used approach for enhancing scalability and decreasing costs. Newer, third-generation blockchains are expanding Layer 1's capabilities, so it is essential to watch them.