Each blockchain layer has a different design, purpose, and utility. Nevertheless, these interoperable networks work together while scaling a given blockchain. In today’s lesson, we will introduce you to the secrets of Layer 1 of blockchain technology and answer what Layer 1 of Blockchain is.
Blockchain trilemma
Before we move on to the main topic of the lesson, it is worth reminding ourselves what the blockchain trilemma is. We have already mentioned it when discussing the other layers of blockchain networks and cryptocurrencies. For a blockchain to work properly, it must have three properties:
- Decentralization. Blockchain is supposed to operate without centralized entities. No government or organization can have authority over it. Just as no distributed computer network manages it.
- Security. The blockchain must resist a 51% attack.
- Scalability. The blockchain network and all its technology must process dozens of transactions per second and survive the growing load.
As you know from our previous lessons, according to this trilemma, at any given time a network of blocks can have only two of these three possibilities.
Of course – since the emergence of this dilemma, many ideas have emerged simultaneously to solve this problem. Each proposed method (Segwit, changes to the consensus mechanism, etc.) have their advantages and disadvantages. However, they share a common goal – to improve the scalability of a given blockchain and improve the operation of the chain.
Layer 1 – definition
Layer 1 is the base level of the entire blockchain architecture. All Layer 1 blockchains validate and execute transactions without any support from another network. They reimburse fees for completed transactions and are responsible for all on-chain transactions. They are often referred to as the “source of truth” of the public ledger.
Processing a transaction on the network is nothing more than logging into your cryptocurrency wallet. The entire transaction goes through the appropriate consensus model, which, as you already know, will be different for each network and its purpose. In addition, tier 1 blockchains usually host their token, which covers the transaction costs or gas fees (Ethereum).
Sharding of layer 1
This is a very intriguing phenomenon in Layer 1. Layer 1 sharding divides the core network into subsets, called shards. Each shard is assigned a set of transactions. In this way, the ecosystem can process many such transactions simultaneously, instead of just one. This is intended to streamline the operation of the entire blockchain network.
Example: assume you have a network with 1,000 nodes and 100 blocks for verification. The network will randomly assign the first 100 nodes to verify the first block, and the next 100 nodes to verify the second block. The third 100 to the third, and so on. When validators verify a block, they will publish a signature, certifying this verification. As a result, the other nodes validate the remaining signatures, which takes much less time than the other signatures.
Layer 1 – examples
The following list of networks contains, in our opinion, the best tier 1 blockchain networks. They power most decentralised applications or dApps.
Of course – the irreplaceable Bitcoin! Bitcoin’s Layer 1 is the underlying architecture. It secures the world’s largest cryptocurrency. It is based on the Proof-of-Work consensus, which verifies new blocks using an algorithm. Additionally, it uses a computationally demanding cryptographic puzzle to do so. Bitcoin is widely considered to be the most secure and decentralised platform. The downside – transactions can take more than 10 minutes to process.
Ethereum. It is the second largest tier 1 network on the Web3. It uses smart contracts in the operation of its network, which verify transactions as long as predetermined conditions are met. Ethereum was originally based on Proof-of-Work consensus, but has recently moved to a Proof-of-Stake update.
Algorand. The network also uses the ‘help’ of smart contracts in the operation of its Layer 1. Unlike Bitcoin and Ethereum, however, it uses Proof-of-Stake consensus. This is a method that selects miners or block validators at random. All this to directly decentralise the verification process.
Cardano. One of the first tier-1 blockchains, it successfully implemented the Proof-of-Stake model. Cardano is known to all of us for its low gas fee, high degree of decentralisation and ability to generate passive income from ADA staking. Protocol transactions are extremely fast, with Cardano validating over 250 transactions per second.
Elrond. A network that was intended to be a direct competitor to Ethereum and Bitcoin. An interesting feature of this ecosystem is the adaptive sharding mechanism, which improves the scalability of the network by combining network and transaction sharding.
Solana. It supports transaction speeds of up to 65,000 TPS with 200 nodes under test network conditions (the alternative blockchain used for testing). The main feature of Solana is its innovative consensus model – Proof-of-History. While typically other blockchains rely on other nodes to verify transactions, Solana uses cryptographic timestamps and determines the order of events. How is this possible? Each Solana node has a clock that allows the network to reach consensus on the timing and order of events. And all without waiting for confirmation from other nodes! This reduces network congestion and dramatically improves scalability. Solana is an entirely rethought technology and internal structure.
THORchain. Despite the popularity of DEXs in the crypto world, you will still find some where you will not be able to trade tokens on different blockchains. For example, you won’t be able to trade BTC on Ethereum or ETH on Solana. However, THORchain is an exception to this. It allows you to trade one digital asset with another on a separate chain. We can compare it to Uniswap, but THORchain has one important advantage – THORNodes.
Layer 1 vs. Layer 2
| Layer 1 | Layer 2 |
| It focuses on decentralization and security. | It focuses on delivering usability and optimal scalability of the blockchain. |
| It contains the history of all transactions. | It has a compressed version of the history of blockchain transactions. |
| Layer 1 solutions typically consist of a network of nodes, block miners, data storage and a consensus mechanism. | Layer 2 protocols are optimized to reduce network loads for normal transactions. |
| Every blockchain requires Layer 1. | Layer 2 protocols are very regularly considered irrelevant, but welcome. |
Summary
Discussing the subsequent blockchain layers, you can see that the entire ecosystem has developed several layer 1 and 2 solutions to deal with the blockchain trilemma.
We may hear the opinion that most solve scaling layer 1 on the blockchain has a negative impact on the blockchain, upsetting the balance between decentralization and security.However – is this really the case? Many Tier 1 solutions have successfully solved the scalability problem and helped decentralized finance.
