Introduction to Blockchain layers: Layer 1, layer 2, layer 3 in 2022

Understanding the blockchain’s layers

You’ve undoubtedly come across words like layer one and layer two protocols if you’ve looked into cryptocurrencies or blockchain in any manner. But are you interested in learning more about these levels and why they exist? In this article, we’ll talk about blockchain layer architecture.

Blockchain technology is a one-of-a-kind combination of contemporary technologies — cryptography, game theory, and so on — with many applications, including cryptocurrency. Cryptography, for example, is a mathematical and computational field that deals with encoding and decoding data. 

Game theory is a mathematical description of strategic interaction among rational decision-makers. Blockchain removes intermediaries, decreases costs, and enhances efficiency by offering transparency and security.

Distributed ledger technology (DLT) preserves information verified by cryptography among users who agree through a specified network protocol without the control of a central authority. By combining these technologies, persons or parties who would normally have no reason to trust each other are encouraged. In addition, they enable blockchain networks to exchange currency and data between users safely.

Blockchains must be very secure due to the lack of a centralized authority. They must also be incredibly scalable to cope with growing numbers of users, transactions, and other data. Layers were created in response to the need for scalability while maintaining top-notch security.

Now too much of an introduction, let’s dig into four types of layers in blockchain!

0 layer

Layer zero of the blockchain comprises components that help make blockchain a reality. It’s the software that makes Bitcoin, Ethereum, and other blockchain networks work. The internet, hardware, and connections that enable layer one to work properly are all layer 0 components.

1st layer/ Layer 1

This is the foundation layer, and its immutability ensures its security. When individuals mention Ethereum, they refer to the Ethereum network or layer one. Consensus methods, programming languages, block time, dispute resolution, and the rules and parameters that keep a blockchain network running are all handled by this layer. 

The implementation layer is another name for it. A layer one blockchain, such as Bitcoin, is one example.

Issues with Layer 1

When used together, these scaling techniques increase network throughput. Layer one, however, looks to be falling short as the number of blockchain users grows. The old and cumbersome proof-of-work consensus procedure on the layer one blockchain is still in use.

While this method is more secure than others, it is time-consuming. This is because miners must use processing resources to solve cryptographic algorithms. As a result, more processing power and time are required in the long term. 

In addition, as the number of users has grown, the strain on layer one blockchain has increased. As a result, processing rates and capacities have slowed.

Alternatives to consider with issues of Layer 1

Ethereum 2.0 will use proof-of-stake as an alternative consensus. This consensus mechanism verifies fresh transaction data blocks based on network participants’ staking collateral, resulting in a faster process.

Sharding is a solution for the layer one blockchain problem’s scalability. Simply said, sharding breaks down the process of validating and authenticating transactions into smaller, more manageable parts. 

Consequently, the workload may be divided over the network to make use of the computational power of more nodes. Furthermore, multiple transactions can be performed sequentially and concurrently since the network processes these shards in parallel.

Layer 2

L2 solutions are the overlapping networks on top of the base layer. Layer two is used by protocols to improve scalability by separating some interactions from the base layer. 

As a result, smart contracts on the principal blockchain protocol only deal with deposits and withdrawals and ensure that off-chain transactions adhere to the rules. One example is a layer two blockchain, such as Bitcoin’s Lightning Network.

So, what’s the difference between blockchain layers one and two? A decentralized ecosystem’s initial layer is the blockchain. Layer two is a third-party integration that works in tandem with layer one to increase the number of nodes and system throughput. At the moment, many layer two blockchain technologies are being deployed.

Two scaling solutions are layered together.

Layer two protocols have gained a lot of traction in recent years, and they’re proving to be the most effective way to solve scalability problems in PoW networks in particular. The sections below discuss several layer two scaling strategies.

A blockchain that is nested

On top of one another, a stacked layer of two blockchains operates. In a nutshell, layer one defines the parameters, while layer two executes the operations. There might be numerous blockchain levels on a single mainchain. Consider it a standard business model.

Rather than having one person (for example, the manager) do all of the work, the manager delegated duties to subordinates, who then reported back to management after they were completed. As a consequence, the effort of the management is decreased while scalability is enhanced. For example, the OMG Plasma Project acts as a level two blockchain for Ethereum’s level one protocol, making transactions cheaper and quicker.

Channels of government

A state channel increases total transaction capacity and speed by allowing two-way communication between a blockchain and off-chain transactional channels through various methods. The miner does not need to immediately be involved in validating a transaction through a state channel.

Instead, it’s a network-adjacent resource with a multi-signature or smart contract method to defend it. When a transaction or batch of transactions on a state channel is completed, the “channel’s” final “state” and its inherent transitions are broadcast to the underlying blockchain.

Bitcoin Lightning and Ethereum’s Raiden Network are two instances of state channels. State channels offer some decentralization in exchange for enhanced scalability in the trilemma tradeoff.

Sidechains

A sidechain is a transactional chain that runs alongside the blockchain and processes large amounts of data. A utility token is typically used as part of the data transfer mechanism between side and main chains. Sidechains have their consensus technique that may be changed for speed and scalability. The standard & main role of the main chain is to offer general security and dispute settlement.

Sidechains differ from state channels in several ways. To begin with, sidechain transactions are not private between participants; instead, they are recorded on the ledger and made public. Furthermore, sidechain security breaches have no impact on the mainchain or other sidechains. Finally, building a sidechain from the ground up takes a long time and a lot of effort.

Rollups

Rollups are layer two blockchain scaling methods that execute transactions outside the layer one network before uploading the transaction data to the layer two blockchains. Because the data is on the base layer, layer one can keep rollups safe.

Rollups benefit users by increasing transaction throughput, allowing more open participation, and lowering gas costs.

Layer 3

Layer three, or L3, is the name given to the application layer. The L3 projects serve as a user interface while concealing the communication channel’s technical elements. As mentioned in the layered structure of the blockchain architecture, L3 apps are what give blockchains their real-world applicability. I will explain more deeply about layer 3 later in another blog post.

That’s all from my side! I will also make a detailed layer-wise article to make you go more deeply! until then, keep reading keep gaining only at cryptocurrencysimple.com