Layer 1: understanding fundamental blockchains

However, layer 1 blockchains face scalability issues, which may limit their ability to process a large number of transactions simultaneously. It can also affect transaction speed and costs, which hampers the overall adoption of technology. To solve these problems, various improvements and innovations have been developed, which aim to optimize the performance of blockchains without sacrificing their security and decentralization.

Key points

- Layer 1 blockchains are autonomous and have their own consensus and security mechanisms.

- The scalability of layer 1 blockchains presents challenges for their ability to process a large number of transactions simultaneously.

- Various improvements and innovations make it possible to optimize the performance of blockchains while maintaining their security and decentralization.

Definition of layer 1

Layer 1, also known as the physical layer, is an essential component of the blockchain network and network systems in general. This is the level of the blockchain protocol itself where consensus rules, data structure, cryptography mechanisms, and transaction management mechanisms are defined. This level of operation allows the network to be autonomous without the need for another network, and uses its own native token for transaction fees.

Main characteristics

One of the main characteristics of Layer 1 is its link to the physical level of network systems. It is responsible for transmitting raw signals over physical media, such as copper cables, optical fibers, or radio waves. Electrical, mechanical, pin, and voltage specifications are defined at this level.

Layer 1 is also associated with the operation of the hardware, which allows the encoding, modulation and sending of data across the network. Layer 1 protocols ensure the conversion of bits into electrical signals to allow communication between devices.

When it comes to blockchain, Layer 1 determines the consensus protocol and cryptography management rules for network security and reliability. Blockchains like Bitcoin and Ethereum are considered to be Layer 1 networks.

The functionality of Layer 1 is closely linked to that of Layer 2, also known as the Data Link Layer. Layer 2 is responsible for structuring data into frames, controlling the error, and managing the flow of bits between network devices. Together, these two layers form the key elements in networking and communication systems.

Layer 1 scalability issues

Consensus Proof of Work (PoW)

Layer 1, the base layer of blockchains, is responsible for processing and completing transactions. However, layer 1 networks face capacity challenges. In particular, the Proof of Work (PoW) consensus mechanism present on blockchains such as Ethereum or Bitcoin poses scalability problems.

PoW is a secure, decentralized, and transparent mechanism, but it has its drawbacks. Indeed, it is both energy-intensive and slow, which limits the number of transactions per second that a blockchain network can handle. For example, the Bitcoin blockchain is limited to 7 transactions per second and the Ethereum blockchain to around 30.

Scalability solutions for Layer 1

Increase in block size

One of the solutions considered to increase the capacity of Layer 1 networks is to increase the size of the blocks. Indeed, it allows more transactions to be processed in the same block. However, this solution can lead to a concentration of power between the most powerful nodes in the network, thus compromising decentralization and security.

Changing the consensus mechanism

Another solution is to completely change the PoW consensus mechanism by another one, such as Proof of Stake (PoS), which relies on holding and blocking tokens to validate transactions and create new blocks. PoS is less energy-intensive and makes it possible to speed up the transaction validation process. However, this requires a profound transformation of the protocol and can present challenges in terms of security and decentralization.

Implementing sharding

Sharding is a technique that involves dividing transactions and data on a blockchain network into several subsets, called shards. Each shard processes a specific set of transactions, allowing for parallelized processing and improved performance. This solution increases the capacity of the Layer 1 network and allows a greater number of simultaneous transactions to be processed. However, sharding can also pose security and coordination issues between shards.

Layer 1 improvements and innovations

The development of Layer 1 saw several major innovations, with SegWit and Sharding being among the most notable.

SegWit

Segregated Witness (SegWit) is a proposed solution to improve the Bitcoin protocol. SegWit aims to optimize block space by separating transaction signatures from the rest of the transaction data. This optimization makes it possible to increase the number of transactions per block and also improves transaction speed.

Additionally, SegWit solves the problem of transaction malleability, making it easy to develop layer 2 solutions like Lightning Network. Thanks to these improvements, the Bitcoin network is made more scalable and secure for users.

Sharding

Sharding is another major innovation in the Layer 1 blockchain space. It is a method of partitioning blockchain data, allowing data to be distributed between several nodes where each node stores only a portion of the entire blockchain. As a result, transaction processing and block validation are becoming faster and more efficient. Sharding is currently used in blockchains such as Ethereum to improve their scalability.

Sharding can be implemented in a variety of ways, including using specific consensus algorithms or by grouping transactions into shards that are then processed by distinct groups of validator nodes. This approach allows for linear scalability and reduces the overall load on the network, which makes it possible to accommodate a greater number of transactions and improve the performance of blockchain protocol.

In short, SegWit and Sharding are key innovations that have improved the performance and scalability of Layer 1 blockchains. These innovations have made blockchains more accessible and adapted to future technology and transaction needs.

Distinction between Layer 1 and Layer 2

Layer 1 and Layer 2 are two distinct concepts in the field of blockchain networks and cryptography.

Layer 1

Layer 1 refers to the main architecture of the blockchain. This is the layer where consensus rules, data structure, cryptography mechanisms, and transaction management mechanisms are defined. This layer is the foundation upon which network security, decentralization, and data integrity are based.

Layer 2

Layer 2 is a network that is superimposed on a layer 1 blockchain. The main objective of Layer 2 solutions is to improve the scalability of the network, i.e. the ability to process an increasing number of transactions without impacting its performance. Layer 2 solutions also reduce costs and transaction times.

Lightning Network

Presentation

The Lightning Network is an example of a Layer-2 solution developed to solve Bitcoin network scalability problems. This network works by creating payment channels between users, allowing instant and low-cost transactions to be made.

How it works

The Lightning Network establishes two-way payment channels between users who want to transact with each other. Instead of sending all transactions directly to the blockchain, users trade through their payment channels. Only when the payment channel is closed are final transactions settled on the main blockchain. This approach makes it possible to significantly reduce the number of transactions that must be validated by the entire network, which improves scalability and reduces transaction costs.

In summary, the distinction between Layer 1 and Layer 2 highlights different approaches to solving the scalability, transaction costs, and decentralization issues inherent in blockchain networks. While Layer 1 represents the basic infrastructure of the blockchain, Layer 2 builds on this foundation to offer complementary solutions to improve the performance of the global network.

Layer 1 blockchain examples

This section introduces various layer 1 blockchains and their unique characteristics.

Elrond

Elrond is a layer 1 blockchain that is distinguished by its ability to process a large number of transactions per second. Thanks to its architecture based on Sharding and its consensus protocol,

bitcoin

Bitcoin is a layer 1 blockchain that is widely recognized as the first and most famous of Cryptocurrencies. It uses a consensus protocol called Proof of Work and is designed to be a decentralized currency with no central authority. Its main characteristic is its security and decentralization.

ethereum

Ethereum is a layer 1 blockchain that allows the creation and execution of smart contracts. It is based on a Proof of Stake protocol. Ethereum is particularly appreciated for its flexibility and its ability to host decentralized applications (DApps).

BNB Smart Chain

BNB Smart Chain is a layer 1 blockchain developed by Binance. It is designed to offer a fast and low-cost solution for decentralized transactions and applications. BNB Smart Chain uses a consensus protocol called delegated proof of authority (DPoS) and is compatible with Ethereum smart contracts.

Solana

Solana is a layer 1 blockchain known for its speed and efficiency. It uses a unique consensus protocol called Proof of History (PoH) combined with Proof of Stake (PoS). Solana can process thousands of transactions per second thanks to its innovative architecture.

Cardano

Cardano is a layer 1 blockchain that focuses on academic research and formal validation. It uses a proof-of-stake consensus protocol called Ouroboros. Cardano is designed to be secure, sustainable, and scalable.

Ripple

Ripple, often referred to as XRP, is a layer 1 blockchain that focuses on the rapid processing of international financial transactions. It uses a unique consensus protocol called Ripple Protocol Consensus Algorithm (RPCA). Ripple is widely used by banks and financial institutions.

Dogecoin

Dogecoin is a layer 1 blockchain that started out as a joke based on an internet meme, but has grown in popularity as a way to tip and donate online. It uses the same proof-of-work consensus protocol as Bitcoin, but with changes to allow for faster transactions.

Cosmos Hub

Cosmos Hub is a layer 1 blockchain that aims to create an “Internet of blockchains”, allowing different blockchains to communicate with each other. It uses a proof-of-stake consensus protocol called Tendermint. Cosmos Hub is designed to improve the interoperability and scalability of blockchains.

What are the differences between Layer 1 and Layer 2? Layer 1 and Layer 2 are layers of the technology stack that supports decentralized applications (DApps) and blockchain services. Layer 1 refers to core networks, such as Bitcoin, BNB Chain, or Ethereum, and their underlying infrastructure. These networks can validate and finalize transactions without the help of another network.

Layer 2, on the other hand, concerns solutions implemented above Layer 1 to improve the scalability, speed and cost of transactions. This includes technologies like sidechains and payment channels. Layer 2 solutions are designed to work in tandem with Layer 1 blockchains while maintaining security and decentralization.

How does Layer 1 compare to other blockchain layers? Layer 1 is considered to be the foundation of a blockchain network. It handles basic functionalities, such as transaction processing, consensus, and smart contract execution. ³. Improving the scalability of Layer 1 networks is often difficult, as we saw with Bitcoin.
Other types of blockchain layers, such as Layer 2, are designed to address issues specific to Layer 1, such as scalability and transaction confirmation times. These layers offer additional functionalities by working in tandem with Layer 1 and by exploiting its basic characteristics.
The comparison between Layer 1 and the other blockchain layers therefore depends on the specific objectives and problems they are intended to address. Layer 1 provides basic and necessary features, while the other layers add additional features to improve network performance and scalability.