What is a Layer 1 network?
Layer 1 is the name given to the first, or base, layer of any blockchain network. Consider Bitcoin as an example. Bitcoin was launched in early 2009, but many years later around 2017, a network on top of Bitcoin called the Lightning Network, launched – Lightning is a Layer 2 protocol on top of Bitcoin, the Layer 1. Today, many leading Layer 1 networks have multiple Layer 2 protocols built on top of them.
Let’s dive a little deeper into the structure of blockchains.
Comparing Blockchains vs Computer Networks
At a basic level, all blockchains are networks of computers. Computer networks comprise groups of network participants, known as nodes, that transmit data and share computing resources. These nodes can connect to each other in very different ways. There are four main types of computer networks:
1. Mesh – A node connects to every other node.
2. Ring – A node connects to two other nodes, creating a bidirectional ring.
3. Bus – A node connects only to another node.
4. Star – A server node connects to client nodes.
The star is the most common computer network because it is fast and cheap. In star networks, the central server node feeds data directly to other nodes, so the data does not have to pass through each node on its way to the other nodes.
This saves network bandwidth, and since the server node provides computing resources directly to the client nodes, it is very efficient. However, the price of this performance is high centralization, both in terms of control and single points of failure (SPoF).
In contrast, peer-to-peer (P2P) networks do not use server nodes to coordinate the network but each node acts as both a client and a server, sharing computing resources within the network. Such networks solve the problem of centralized control and SPoF, which makes them ideal for P2P money like Bitcoin.
The cost of decentralization is that peer-to-peer networks tend to be less scalable. This issue applies to blockchain networks because they are secured by the consensus mechanisms of P2P networks. Vitalik Buterin, co-founder of Ethereum, called this balancing act the Scalability Trilemma (also known as the Blockchain Trilemma).
Early blockchains were limited to offering only two features at a time, meaning they had to sacrifice either scalability, security, or decentralization.
What are Layer 1 and 2 blockchains?
Bitcoin, Ethereum, and Oasis are all examples of Layer 1 blockchains. Different Layer 1 networks have Layer 2 networks built on top of them, and some Layer 1s talk to Layer 2s on other networks. For example, the Oasis Privacy Layer (OPL) is a tool built for the Oasis network (again, a Layer 1) to talk to any other network, like Arbitrium, a Layer 2 on Ethereum.
Layer 1 and Layer 2 blockchains are an important part of scaling and security crypto.
Bitcoin has managed to assuage most security concerns for a decade, so its Level 1 updates are more conservative and less frequent. However, Bitcoin still prioritizes Tier 2 solutions for true scalability via the Lightning Network. The same is true of Ethereum, with many Layer 2 networks built on top of it. In both cases, L2 protocols take the workload from the main L1 chain, process it elsewhere, and pass the data back to L1 in a much more efficient way.
L2 uses a variety of scalability technologies to achieve this, as noted in the table above.
However, an ecosystem of L1 and L2 networks is complicated. Tokens must be transported through blockchain bridges, and each dApp must be integrated into each L2. Instead, sticking with only L1 networks would make life easier for developers and users. Building tools to help scale and more easily integrate all these different networks is the main challenge for developers in crypto over the coming years.