Layer 1 Vs Layer 2 Vs Layer 3 Blockchains: A Begineer Guide To Understand Blockchains
Roles of the Blockchain layers:
- Layer 1 performs the basic functions
- Layer 2 works to increase the efficiency and reliability
- Layer 3 facilitates contact between networks and decentralizes the applications.
Understanding the Differences – Layer 1 vs Layer 2 vs Layer 3
Users face several challenges during the use of blockchains, such as slow transactions and high gas fees. Most blockchains work differently to ease the work of the users. The functionality of the blockchains depends on the construction of the blockchains which include the type of consensus mechanism it uses. The blockchains are made up of generally three tiers such as first, second and third.
Layer 1 Blockchain
The layer is the base of the entire Web 3 infrastructure. All the components of the blockchains exist on layer 1.
Key components of the first layer are-
- Hardware
- Consensus layer
- Network layer
- Application layer
- Data layer
Different functions such as enhancing security, interoperability and communication are done by these basic components. The level of consensus determines the speed and efficiency of transactions.
Examples of layer 1 blockchains are:
Layer 1 provides protection to separate applications that exist on them. Approval is also given by layer 1 to the transactions that are occurring in the layer 2 blockchains.
What Challenges Do Layer 1 Blockchains Face?
Several challenges are faced by layers like scalability issues because many times most cases cannot handle big volumes of transactions at once. This results in the slow speed of the blockchain and high transaction fees.
Another big issue that occurs in layer 1 is that the user needs to compromise one or two key aspects of the network, namely security, speed and scalability. It means that a blockchain that is expandable can have slow transactions poor security or maybe both. And then layer 2 and layer 3 come into action and help with the issues of security, speed and interoperability issues.
Layer 2 Blockchains
It helps to provide the solution to the issue that occurs during the use of layer 1 blockchains. In other words, it provides the scalability to the entire networked system. It functions on top of the main blockchain and increases the productivity of the entire system.
It reduces the traffic from the main blockchain by diverting away the transactions which helps in decreasing the network blockage and increasing throughput in the process. It works the same as the mini-blockchains, which connect to the central blockchain.
Even though blockchains can have another layer system that helps to improve the efficiency of the whole network by performing various functions. Autonomous mechanisms are used by the second-layer solutions to increase productivity and speed.
For example – some second-tier blockchains perform bulk transactions which they upload to the main blockchains. An example of a layer 2 network is lightning which exists in the Bitcoin blockchain.
Lightning provides a cost-effective transaction at a high speed. Another example of a layer 2 network is Polygon which is similar to the Lightning network. It increases network speed and transaction results. Decentralized applications are also supported by Polygon.
This is how the “division of labour’’ is created by the second-level blockchains.
Different types of Layer 2 solutions
There are many types of second-layer solutions that a blockchain can utilize. State blockchains, side blockchains and convolutions are included in this.
State blockchains: it is a mini blockchain that exists in a layer 1 network. It promotes two-way communication between the blockchain and autonomous transactional substructures in order to increase the amount of transactions and to fasten the speed. Examples: – Liquid Network, Bitcoin Lightning and Ethereum’s Raiden network
Sideways blockchains: it is a submethod of the first-level blockchain that transmits the large packets of transactions offline to the main blockchain. With this process, the speed of the blockchain increases and helps to work in an efficient manner. It also helps to protect the network and solves conflicts
Rollups: it executes the transaction outside the main blockchain and passes them back to the principal structure. Rollups is a mini blockchain.
Layer 3 Blockchain
It is also known as the third-level blockchain. Layer 3 blockchains are the foundation that hosts localized applications. Due to this, it is also known as the application layer. It increases the connection between the underlying protocol and the other blockchains.
There are some blockchains like Ethereum and Solana that host many decentralized financial applications (DeFi) on the other hand, Blockchains like Bitcoins do not host decentralized applications. Gaming application assists in this layer.
There are different initiatives at present that join some applications into the Bitcoin blockchain such as CakeFi, which is developed from the DeFi chain fork. It provides lending, stating and liquidity mining functions for the bitcoin blockchain. Another blockchain Ethereum hosts more than 3,000 decentralized applications at present. It has a total market value of more than $250 billion. Solana has a total market value of over $50 billion with over 500 applications. It hosts a number of decentralized Layer 3 applications.
On the other side, the Bitcoin network does not host decentralized applications. As a result, Ethereum is the most popular blockchain.
Conclusion
To decrease the traffic and increase the output developers have come up with an idea to tackle all the problems faced by the user. Layer 2 and layer 3 mechanisms were introduced to expand the network and to increase the operations.
