In blockchain technology, the term Layer 1 Blockchain refers to a fundamental level in the network. Layer 1 provides essential services for the network, such as recording transactions on the public ledger and ensuring security. Let’s explore Layer 1 in detail with Tonraffles in the following article!
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What is Layer 1 Blockchain ?
Layer 1 Blockchain, also known as foundational blockchain or infrastructure blockchain, is a distributed ledger technology (DLT) designed to securely record transactions on a public, immutable ledger without requiring trust.
Furthermore, Layer 1 Blockchain is recognized as a crucial infrastructure platform in developing a blockchain ecosystem. It operates as and fulfills the role of a processing unit, finalizing on-chain transactions without the need for third-party support or other blockchains, making Layer 1 often seen as a transparent public ledger.
Additionally, Layer-1 Blockchain is the most basic form of blockchain and serves as the foundation for all other blockchain layers. Layer 1s are often referred to as the “core” or “foundation” of blockchains because they provide infrastructure for all applications and protocols built on the network. They ensure the maintenance of a distributed ledger, confirm transactions, and protect the network from malicious actions.
At the “core” of a Layer-1 is a consensus mechanism that confirms and records transactions on the ledger. This ensures the ledger cannot be altered and can be trusted by all network participants. Common consensus mechanisms on Layer-1 blockchains include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
The process to process a transaction, for most Layer 1 Blockchains, typically involves logging into the blockchain wallet and conducting the transaction there. Your assets (tokens) will be confirmed, recorded, and completed by the consensus mechanism (which varies across blockchains). Hence, different blockchains will have different advantages and disadvantages.
Additionally, Layer 1 blockchains often have their own native token to reward network operation (running nodes) or as gas fees to pay for each transaction.
The importance of Layer 1 in developing the blockchain ecosystem
Layer 1 Blockchain is vital as it provides infrastructure for decentralized applications to develop and scale. It handles transactions, ensures transparent ledger, and protects the network. Without Layer 1, decentralized applications would be challenging to build.
Layer 1 Blockchain is crucial as it provides a decentralized platform for applications and services. This means that applications and services built on Layer 1 are not dependent on any single entity. This makes them safer and more resistant to censorship.
Finally, Layer 1 infrastructure is crucial as it can be used to create new forms of value. This is because blockchains are immutable and transparent, making them ideal for recording asset ownership. This has led to the development of many new asset classes, such as cryptocurrencies (tokens) and non-fungible tokens (NFTs).
Overall, Layer 1 is an essential part of the blockchain ecosystem. It provides a foundation for blockchain networks, a decentralized platform for applications and services, and a way to create new forms of value.
Values of Layer 1:
Most popular blockchains are Layer 1s. Examples include Bitcoin, Ethereum, Avalanche, and Solana. These blockchains share some common characteristics that define them as Layer 1s.
Block production
Fixed units of the blockchain – blocks – are produced by miners (or validators) and recorded on the blockchain.
Blocks are data structures containing references to previously generated blocks in a chain and information about some new transactions. This creates a transparent public ledger, known as the blockchain, where every transaction is recorded and computed.
Finality of transactions
The finality of transactions ensures that a transaction cannot be altered or reversed. This indicates that a transaction is recorded in an immutable on-chain state, and the time to achieve this may vary depending on the blockchain’s design. While transactions can be processed on other layers or chains, they can only be finalized on Layer 1.
Assets
Cryptocurrencies used to pay transaction fees and reward miners/validators on Layer 1 are called coins and are essential for Layer 1 chain operations. Conversely, the cryptocurrencies that power decentralized networks and applications built on Layer 1 are called tokens (such as UNI, DAI, LINK, and SAND).
Security
A Layer 1 chain defines the security parameters of the network. This includes the consensus mechanism the chain uses (e.g., Proof of Work, Proof of Stake) and the rules governing how validators interact on a network. While other blockchain layers may provide some security measures, Layer 1 is the ultimate in ecosystem security.
How Layer 1 Blockchain is Built
Blockchain: This is the core component of the Layer 1 Blockchain network. The blockchain is built from blocks linked together through hashing functions, forming an immutable chain. Each block contains information about transactions conducted within the network.
Consensus Protocol: Layer 1 Blockchain uses a consensus protocol to ensure that all nodes in the system agree on a common version of the ledger. This consensus protocol defines how new nodes are allowed to join the network and how decisions regarding ledger changes are made.
Virtual Machine: Some Layer 1s provide a virtual machine like the Ethereum Virtual Machine (EVM) to execute smart contracts on the network. This virtual machine creates an environment for running decentralized applications and smart contracts, enabling Dapps (decentralized applications) to operate on the blockchain.
Security Layer: Layer 1 applies security measures to ensure the integrity and safety of the system. This includes using strong encryption and cryptographic algorithms to protect data on the network. Additionally, the security layer also includes authentication methods and digital signatures to ensure authenticity and non-repudiation.
This architectural model allows Layer 1 Blockchain to provide fundamental services such as transaction storage and confirmation, network consensus, and smart contract execution. It creates the foundational platform for projects and applications relying on blockchain.
Below are some of the most common consensus mechanisms:
Proof of Work (PoW): PoW is the most common consensus mechanism. In PoW, nodes compete to solve complex mathematical problems to add blocks to the blockchain. The node that solves the problem first is rewarded with cryptocurrency.
Proof of Stake (PoS): PoS is a newer consensus mechanism gaining popularity. In PoS, staking nodes stake their cryptocurrency to participate in the consensus process. Nodes with the largest stake are more likely to be chosen to add blocks to the blockchain.
Delegated Proof of Stake (DPoS): DPoS is a variation of PoS that allows users to delegate their stake to a node operator. The node operator then votes on behalf of the users.
The choice of consensus mechanism significantly affects the performance and security of the blockchain. PoW blockchains are typically more secure than PoS blockchains, but they are also slower and more costly. PoS blockchains are usually faster and cheaper than PoW blockchains, but they may lag in security.
The blockchain architecture also significantly affects the performance and security of the blockchain. Blockchains with a larger number of nodes are more secure than blockchains with fewer nodes. However, blockchains with a larger number of nodes may also be slower.
Blockchain software needs to be designed to ensure safety and efficiency. The software needs to handle a large number of transactions and needs to defend against attacks.
Blockchains need to be deployed on node networks to operate. Nodes can run on computers or cloud-based servers.
Blockchain needs to be marketed to potential users to be successful. Marketing efforts should focus on the benefits of using blockchain.
Limitations of Layer 1
Layer 1s will provide the basic functions of a blockchain. The main goal of any blockchain is to optimize decentralization, security, and scalability. However, balancing these three factors is quite challenging, and this is also why achieving all 3 factors is referred to as the Blockchain Trilemma.
The initial Layer 1 Blockchains (like Bitcoin and Ethereum) prioritize decentralization and security but trade off network scalability as user adoption increases. This has inspired developers to adjust their designs to prioritize scalability or work on “off-chain” solutions (understood as Layer 2 solutions).
There are several limitations on how Layer 1s can improve scalability by adapting their core architecture. These methods include:
Increasing block size: Larger blocks can “fit” more transactions per block, speeding up the network. However, the downside is that network-protecting computers (nodes) must increase their hardware requirements, posing potential risks of excessive centralization.
Changing consensus mechanisms: Blockchains based on Proof of Stake consensus mechanisms can often be faster and require fewer resources than Proof of Work-based chains. However, some argue this comes with a trade-off of weaker security and centralization.
Sharding: Layer 1s can shard data into a number of distinct data components (called shards), helping to reduce network congestion and increase transaction speeds. However, communication between sharded chains can be complex, leading to weaker security for the blockchain.
The relationships between Layer 0 – Layer 1 – Layer 2
The relationship between Layer 1 and Layer 2:
Layer 2 solutions are platforms designed to enhance the functionalities of Layer 1 technology, often addressing scalability issues. They are typically built on top of Layer 1 blockchains and may require users to transfer assets from the main chain to Layer 2 through a bridge.
Layer 2 solutions can be standalone blockchains, still leveraging security from Layer 1. They process transactions off-chain from Layer 1 and relay transaction information back to the Layer 1 network for settlement and confirmation. This allows for faster transaction processing and reduced fees for users.
Currently, there is significant investor interest in two Layer 2 operational models: ZK-Rollups and Optimistic Rollups. Both types of Rollups compact transactions and send them as a single data “roll” to Layer 1.
However, these methods differ in how they ensure system trust. In ZK-Rollups (such as zkSync), complex computational processes called zero-knowledge proofs are used to guarantee transaction validity.
In contrast, Optimistic Rollups (like Optimism and Arbitrum) assume validity and can be challenged by verifiers through a separate process called Fraud proofs.
The relationship between Layer 1 and Layer 0:
Layer 0, also known as the “Data Transport Layer,” is created to address scalability, security, and decentralization issues in Layer 1 blockchains. Layer 0 solutions do not alter the blockchain structure but maintain the original ecosystem principles to enhance performance.
Layer 0 protocols help overcome challenges faced by Layer 1 networks like Ethereum. They establish a more flexible infrastructure, enabling developers to launch purpose-built blockchains, solving scalability and interoperability issues.
The flexibility of Layer 0 targets developers, providing user-friendly software development tools and seamless interfaces to create custom blockchains. Layer 0 protocols enable developers to customize their blockchain and control the type of decentralized applications they want to build.
Examples of Layer 0 protocols include Cosmos, Polkadot, and Avalanche. These protocols create primary blockchain networks and facilitate data transmission across different blockchains.
Layer 0 is considered a potential trend in the future and may see increasing demand as the adoption of crypto and blockchain expands.
