Layer 1 vs. Layer 2: An Overview
Layer 1 scaling solutions are changes made to a blockchain’s programming that allow it to handle varying amounts of transactions. Layer 2 scaling solutions are programs, networks, or other blockchains that offload some of a primary chain’s work, conduct it, and periodically send the data back to be processed.
Key Takeaways
- Scaling to handle increasing traffic is one of blockchain’s challenges.
- Layer 1 scaling solutions are changes made on a primary blockchain to address the issue of slow transaction processing times.
- Layer 2 scaling solutions are off-chain programs or blockchains that take over most of the work primary blockchains are required to do, then send it back to the primary chain.
- Some blockchains have successfully implemented Layer 1 and 2 solutions, but others have struggled to find any that are accepted and have worked to decrease transaction times.
What Are Layer 1 and Layer 2 Scaling Solutions?
Blockchain developers use technology terms like “layers” to refer to the architecture or structure used to create blockchains. Blockchains are organized into these layers, and each layer performs different functions. Layers are named by their level of dependence on another layer, such as Layer 0 and Layer 1. Layer 1 depends on Layer 0 for certain functions, Layer 2 would rely on Layer 1, and so on.
When it comes to layers, the generally accepted way of defining them is:
- Layer 0: Infrastructure
- Layer 1: The data layer, the primary blockchain
- Layer 2: The networking layer, which facilitates communication between nodes, and where off-chain scaling solutions connect
- Layer 3: The consensus layer, where the consensus protocols and mechanisms are stored and performed
- Layer 4: The application layer, where applications can be built to interact with the blockchain
It’s more common to hear a primary blockchain called a Layer 1 blockchain, and a blockchain that does work for or using a primary blockchain called a Layer 2 blockchain. Even more confusing is the scaling solution terminology.
Layer 1 vs. Layer 2 Scaling
Layer 1 scaling solutions typically involve actions taken on a primary blockchain, such as Bitcoin, Ethereum, or Solana, to vary throughput depending on demand.
Layer 2 scaling solutions are typically any solution created to integrate with a Layer 1 blockchain like Bitcoin and offload much of the work it must do and do it for that blockchain. The Layer 2 scaling solution then sends transaction data back to the Layer 1 blockchain to be validated and permanently stored on it. This frees up resources on the Layer 1 blockchain, increasing its throughput and, thus, its ability to process an ever-increasing number of transactions.
Fast Fact
There is generally no need for blockchains to have Layer 0, 3, or 4 scaling solutions because the networking and data layers are where transaction speed bottlenecks typically are.
Layer 1 Scaling Solution Example
Layer 1 scaling solutions are program or code changes to a primary blockchain that enhance its ability to handle varying or increasing amounts of activity. On cryptocurrency blockchains, scaling is a concern because of crypto’s growing popularity and the corresponding increase in transactions.
An example of a Layer 1 scaling solution is “The Merge,” which was implemented on the Ethereum blockchain in 2022. Ethereum’s Merge combined the Beacon Chain with the original Ethereum blockchain, transitioning it from a proof-of-work to a proof-of-stake blockchain.
This update also set the stage for future updates that were (and are) designed to enhance the blockchain’s scalability.
Layer 2 Scaling Solution Examples
Bitcoin is notorious for its lack of scalability. Many forks have occurred primarily because developers disagreed on how to implement scaling solutions. One solution that emerged was the Lightning Network, a smart contract layer that offloads work by allowing users to create channels that remain open as long as needed. Users can conduct multiple transactions, and when the channel is closed, the Lightning Network sends the transaction information to the Bitcoin blockchain to be officially processed.
So, instead of clogging up the Bitcoin network with single transactions, the Lightning Network sends many transactions to the blockchain at once to be processed, increasing the blockchain’s overall throughput. However, the Lightning Network was not as popular or didn’t work as intended, and Bitcoin’s average transactions per second didn’t change much.
Rollups are another scaling solution in which an off-chain program or side chain “rolls” many transactions into one and then sends them to the primary blockchain.
Is Ethereum Layer 1 or Layer 2?
Ethereum is a primary blockchain made up of different programming layers, but it is commonly called a Layer 1 blockchain because transactions are executed and confirmed on it.
What Is a Layer 1 Blockchain?
Blockchains that confirm transactions and execute them are commonly called Layer 1 blockchains. Examples are Bitcoin and Ethereum. A Layer 2 blockchain example is Arbitrum, which is a side chain designed to scale Ethereum.
Is Solana a Layer 1 or 2?
Solana is a Layer 1 blockchain because it executes and confirms transactions.
The Bottom Line
Layer 1 scaling solutions involve changes to a blockchain’s programming or code that allow it to meet increased demand. Level 2 scaling solutions involve blockchains or programs that process information for a Layer 1 blockchain, allowing it to meet increased activity levels. While attacking the scaling issue differently, both solutions attempt to increase a blockchain’s ability to handle more transactions as it becomes more popular.
