Layer 1 is the primary blockchain architecture whereas Layer 2 refers to an overlaying network on top of it. Learn more about layer 1 and layer 2 blockchain solutions

1. Layer-1 and Layer-2 Blockchain – The Difference

2. Introduction
Blockchain technology has grown rapidly since Satoshi Nakamoto brought Bitcoin to the world’s attention. Since then,
in the race to fulfill every requirement of decentralized products like DeFi and Dex, blockchains, especially layer 1 and
layer 2 blockchains, have had to adapt and scale as much as possible. An increase in scalability also means risks to
the chain’s integrity and security, which means that the developers must make the blockchain scalable while also
maintaining the network’s security. Note, blockchain was introduced focusing only on decentralization and security that
led to its self-imposed scalability limits like smaller block sizes and low block production rates.
What is Blockchain Layer 1?
Layer 1 protocols are simple additions to the existing base layer of a blockchain. Some prominent examples are
Ethereum and Bitcoin, where the layer 1 protocols have been experimenting with its protocols to adapt and scale
primarily by increasing the data storing capacity of each block (block size) along with the block rate to improve
throughput/transaction speed. Limiting throughput eventually results in network congestion. In order to decongest, the
networks would need individual nodes to be equipped with high hardware and software requirements. At that point,
only limited people can afford to run a node. When network congestion results in higher costs to operate a node
coupled with the high demand for limited block space, nodes prioritize transactions in order of highest fees paid
instead of processing transactions in the order they were received inevitably driving up the average transaction fees for
users.
More modern L1 blockchain networks (especially those that are live since 2021) are now working on their protocols to
be both scalable, fast and lower the transaction fees for users. Blockchains like Shardeum are using mechanisms
like sharding to significantly improve the scalability and maintain low fees even as the usage grows. Sharding, in
particular, involves breaking up the L1 chain into smaller chains called shards, each capable of independently

3. What is Blockchain Layer 2?
Increased scalability and speed paves way for greater adoption even though L1 platforms will need some more time to
solve the blockchain trilemma – where it can maintain high security, decentralization and scalability – all at the same
time. But once Ethereum took the Bitcoin’s innovation to a whole new league by introducing smart contracts and
enabling blockchain technology to be used by multiple industries such as finance, art, governance since 2016, the
need for layer 2 scalable solutions arose overnight. Public blockchains, who were only fulfilling the job of decentralized
payment processors and peer-to-peer transfer of value thus far, suddenly saw the volume of user transactions grow
rapidly which they weren’t prepared for at all.
And considering L1 blockchains are permissionless, layer 2 solutions and other types of services started building over
them immediately as a stop-gap measure. A good example of a layer 2 blockchain solution is rollup. We will go through
some of them in the segment below. In a nutshell, these layer 2 networks improves scalability and other inherent
shortcomings of public blockchains (like privacy) by processing transactions off-chain, reducing congestion and costs,
while preserving security through the mainchain. Here are some of the examples.
1. Rollups
Rollups are layer 2 solutions that aim to improve the scalability by aggregating multiple transactions into a single
transaction. There are two types of rollups: optimistic rollups and zk-rollups. In optimistic rollups, transactions are
initially processed off-chain by ‘assuming’ all of them are valid and then later verified on-chain for any invalid ones. In
zk-rollups, transactions are verified off-chain using zero-knowledge proofs (by proving the transactions are valid
without revealing specific details, similar to you proving you are over 18 without revealing your exact date of birth)
before being committed to the blockchain. Rollups allow for increased transaction throughput and reduced gas fees by