Back to Course

2. Intermediate Course

0% Complete
0/0 Steps
  1. 1. Ethereum 2.0 - What is it? 
  2. 2. What is cryptocurrency burning?
  3. 3. How to create your own cryptocurrency? 
  4. 4. Blockchain Oracle - what are oracles? 
  5. 5. How to make money with NFT?
  6. 6. What is an ERC20 token and how is it created?
  7. 7. The Metaverse – a new virtual world
  8. 8. Metaverse – TOP 15 virtual reality projects
  9. 9. Technical analysis – is it worth using?
  10. 10. What are DeFi liquidity pools?
  11. 11. Second layer (layer 2) - what is it? 
  12. 12. What are wrapped tokens 
  13. 13. What is the Lightning Network, and how does it work?
  14. 14. What are security tokens?
  15. 15. What is Play-to-Earn (P2E) and how does it work?
  16. 16. What are Social Tokens? 
  17. 17. Examples of the use of WEB3 on the blockchain
  18. 18. What is Web5? 
  19. 19. Ethereum London Hard Fork - what is it ? 
  20. 20. Segregated Witness - what is Segwit Bitcoin all about?
  21. 21. Polkadot - Decentralized blockchain and DOT cryptocurrency
  22. 22. Polkadot Parachain - Next-generation blockchain
  23. 23. Trading order types: stop loss, trailing stop loss, LIMIT
  24. 24. Set up of Stop Loss and Take Profit orders
  25. 25. What are Decentralized Cryptocurrency DEX Exchanges?
  26. 26. What is Curve Finance?
  27. 27. What is GameFi and how does it work?
  28. 28. Non-fungible tokens and NFT exchanges
  29. 29. Cryptocurrency steps - What is move to earn M2E?
  30. 30. What is Proof of Reserves (PoR)? How does it work?
  31. 31. Interoperability in the world of cryptocurrencies and blockchain
  32. 32. Blockchain and its layers - What is layer three in Blockchain (L3)?
  33. 33. What is Layer 0 in Blockchain technology?
  34. 34. What is layer 1 in Blockchain?
  35. 35. What is MakerDAO and DAI Stablecoin?
  36. 36. What is Blockchain sharding?
  37. 37. What is the NFT licence fee?
  38. 38. What is the SubDAO protocol, and how does it work?
  39. 39. The main differences between static NFT and dynamic NFT
  40. 40. What is minting an NFT?
  41. 41. Mainnet versus Testnet on the Blockchain. The complete guide!
  42. 42. What are NFT Ordinals? A guide to Bitcoin NFT.
  43. 43. Market Cap versus Fully Diluted Market Cap - the most important differences you should know!
  44. 44. MINA Protocol: the lightest blockchain in the world!
  45. 45. NFT Gas Fee - what is it? How can you reduce your gas fee?
  46. 46. Liquidity Provider Tokens (LPs). What are they, and why are they so important?
  47. 47. What is KnowOrigin NFT, and how does it work?
  48. 48. What is decentralized social media?
  49. 49. What is the Ethereum Name Service (ENS) and how does it work?
  50. 50. Arbitrum: Ethereum scaling solution - everything you need to know
  51. 51. Ethereum ERC-4337 - what is it and how does this standard work?
  52. 52. Sustainable Blockchain - Proof of Useful Work & Flux
  53. 53. Ethereum Proof-of-Stake (PoS) - what should you know?
  54. 54. Atomic Swap: What is an atomic swap, and how does it work with cryptocurrencies?
  55. 55. What Is Cryptocurrency Vesting? What Are Its Advantages?
  56. 56. What Is the Metaplex Candy Machine Protocol? How Does It Work?
  57. 57. What Is the BNB Greenfield Ecosystem?
  58. 58. Real Yield in DeFi - what is this trend? What does it consist of?
  59. 59. What Is Slashing in Cryptocurrencies?
  60. 60. How to Create Your Own Decentralized Autonomous Organization (DAO)?
  61. 61. The ERC-721X VS ERC-721 Standard – Key Differences!
  62. 62. Royalties – What Are They? How Does This Type of Licensing Fee Work?
  63. 63. Polygon 2.0 - the value layer for the Internet
  64. 64. ERC-6551 - the new NFT standard. What does it bring to the non-exchangeable token sector?
  65. 65. What is TradFi? The importance for cryptocurrencies!
  66. 66. What is the Real World Asset (RWA) trend in cryptocurrencies? Explanation and examples!
  67. 67. Pyth Network: a powerful oracle harnessing the power of Solana!
  68. 68. Vampire Attacks in Decentralized Finance (DeFi): Explanation and Examples
  69. 69. What are stables in the world of cryptocurrencies?
  70. 70. What Is Binance Oracle?
  71. 71. What is NFT Lending all about? An innovative solution in the world of cryptocurrencies!
  72. 72. Shibarium: A new era in the Shiba Inu ecosystem?
  73. 73. What is an ETF? How will an exchange-traded fund on bitcoin work?
  74. 74. Symmetric and asymmetric encryption - key cryptography techniques!
  75. 75. Cosmos SDK: Building the Blockchain Ecosystem
  76. 76. DAO Investment: A revolution in the world of finance and investment
  77. 77. What is cross-chain interoperability in Blockchain technology?
  78. 78. Blockchain trilemma - explanation of the problem. What is the impact on cryptocurrency payments?
Lesson 34 of 78
In Progress

34. What is layer 1 in Blockchain?

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:

  1. 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.
  2. Security. The blockchain must resist a 51% attack.
  3. 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 layer 1 blockchain networks. They power most decentralized applications or dApps.

  1. Of course – the irreplaceable Bitcoin! Layer 1 of Bitcoin is the underlying architecture. It secures the world’s largest cryptocurrency. It is based on the Proof-of-Work consensus, which verifies new blocks with an algorithm. Additionally, it uses a computationally demanding cryptographic puzzle to do so. It is widely believed that Bitcoin is the most secure and decentralized platform. The downside – it can take more than 10 minutes to process transactions.
  2. Ethereum. It is the second-largest tier-1 network on the Web3. In operating its network, it uses intelligent contracts that verify transactions as long as predetermined conditions are met. Initially, Ethereum was based on the Proof-of-Work consensus, but has recently moved to a Proof-of-Stake upgrade.
  3. 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 decentralize the verification process.
  4. Cardano. It is one of the first Layer 1 blockchains. It successfully implemented the Proof-of-Stake model. Cardano is known to us all for its low gas fee, high degree of decentralization and ability to generate passive income from ADA staking. Transactions in the protocol are extremely fast – Cardano approves more than 250 transactions per second.
  5. 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 together.
  6. Solana. It supports transaction speeds of up to 65,000 TPS with 200 nodes under test network conditions (the alternative blockchain used for testing).  Solana’s main feature is an 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 time 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. You can read more about this protocol here.
  7. THORchain. Despite the popularity of DEX in the crypto world, you will still find somewhere 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 Solan. 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 1Layer 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.