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What is Layer 1 Blockchain?

What is Layer 1 Blockchain?

Layer 1 blockchain denotes the core infrastructure & base layer of a blockchain network. Refer this blog to know what is layer 1 blockchain & its...

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Introduction

While it is easy to see how revolutionary blockchain technology is, the scalability trilemma of ensuring scalability, security, and decentralization simultaneously has always been a challenge for public layer 1 blockchains. That being said, layer 1 blockchains are now primed to solve blockchain trilemma through innovation and by taking inspiration from traditional techniques. But what is Layer 1 blockchain, and how does it work?

What is Layer 1 Blockchain?

A Layer 1 blockchain refers to a base layer of a blockchain network and its underlying infrastructure.

Introduction About Layer 1 Blockchain

Layer 1 blockchain integrates solutions that strengthen the foundational layer, enhancing the network and its applications in terms of security, decentralization, and scalability. Applications and products built on top of Layer 1 significantly derive their features and benefits from it. It is more or less similar to say, your iOS or Android which is the base operating system used by various apps to build and deploy their solutions for end users. In the context of blockchain, these apps are known as ‘decentralized applications’ or dapps. Unlike its Web2 centralized peers, dapps on a public blockchain are free to build, deploy and provide solutions to end users without anyone’s permission. Dapp developers/teams typically retain 100% of their revenues, without the need to pay commission fees or share revenue with the Layer 1 blockchain network.

The primary feature of a public decentralized Layer 1 network is its consensus mechanism. Various consensus mechanisms offer varying levels of security, and speed. Layer 1 blockchains process and record commercial transactions to their native ledgers within their designated ecosystems utilizing specific consensus mechanisms to ensure accuracy and security. Each Layer 1 blockchain typically comes equipped with its own native cryptocurrency. This intrinsic digital asset not only facilitates the payment of transaction fees but also supports and enables a range of advanced functionalities and features within its ecosystem. Popular L1 networks include Bitcoin and Ethereum.

How Does Layer 1 Blockchain Work?

These blockchains operate on a peer-to-peer network of nodes, with each node holding a copy of entire or partial blockchain ledger. Layer 1 blockchain protocols utilize a distributed consensus algorithm, such as proof-of-stake (PoS) or proof-of-work (PoW), to validate new transactions and add them to the blockchain. The security of layer 1 blockchains is further reinforced through cryptographic techniques, such as hashing and digital signatures. These blockchains are decentralized, transparent, and immutable, making them ideal for building decentralized applications and facilitating trustless transactions.

Layer 1 Scaling Solutions

In a blockchain, scaling refers to a network’s ability to expand while accommodating increasing demand. To put it in another way, as the use of crypto and blockchain grows exponentially, the underlying infrastructure should be able to support the growing number of users and transactions. Layer-1 scaling solutions, often referred to as on-chain networks, are foundational crypto protocols capable of independently processing and finalizing transactions on their own blockchains. This means they have the inherent infrastructure to handle transactions without relying on external chains or layers such as layer 2 (L2) blockchains and side chains. Let’s not worry about layer 2s and other components of a blockchain ecosystem in this blog. We will stay focused on layer 1’s which has got more unwinding in the below paras. We’ll start with a couple of examples of layer 1 scaling – SegWit and Sharding.

SegWit

The list of layer 1 blockchains includes Bitcoin’s SegWit, which stands for ‘Segregated Witness’. Bitcoin’s SegWit is an upgrade to the Bitcoin protocol, implemented to address issues like transaction mutability and to increase the block size limit, thereby allowing for more transactions to be stored in a block. By segregating the witness data from transaction data, SegWit effectively optimizes the limited space within each block. This not only enhances the network’s efficiency and speed but also paves the way for further upgrades and the implementation of second-layer (L2) solutions like the Lightning Network.

Sharding

What is Layer-1 Sharding
Source: Freepik

Sharding is a layer-1 scaling solution for increasing transaction throughput or speed. The method is a type of database partitioning that can be applied to blockchain distributed ledgers. A network and its nodes are divided into shards to distribute workload and improve transaction speed. Each shard manages a subset of the network’s activity. This means it has its own transactions, nodes, and blocks. The division of the network and its nodes aid in the effective distribution of workload along with enabling faster transaction speeds.

With sharding, not every node maintains a full record of the entire blockchain. In a sharded network, nodes store only a segment or subset of the blockchain, rather than the complete ledger. This approach allows each node to be responsible for a specific shard, optimizing storage and enhancing system efficiency. Nodes relay summaries of their completed tasks to the main chain and provide updates on local data, including address balances and related metrics. Zilliqa, Elrond, Near are few examples of sharded blockchain networks. Both Ethereum and Shardeum are actively working to deploy very highly sophisticated sharded networks.

Consensus Mechanisms used by Layer 1 Blockchains

consensus protocol
Source: Freepik

We’ll look at two major types of consensus mechanisms used by layer 1 public blockchain networks that will demonstrate that all of them have a common goal – to help maximize security, scalability and decentralization, if not maintain them simultaneously on the network (trilemma). The consensus mechanism is especially crucial for public blockchains where nodes are predominantly unrelated and can be operated by anyone from the public. Given the distributed architecture of these blockchains, there’s a pressing need for a system where these independent nodes reach an agreement. This mechanism ensures that a majority consensus validates the legitimacy of transactions, providing a unified and trustworthy record in an environment where participants does not necessarily trust each other.

1. Proof Of Work

Proof of Work is one of the consensus mechanisms used in blockchain technology, and it was also the very first to be put to use via the Bitcoin network. The ‘Proof of Work’ mechanism earns its name because it requires validators to provide evidence of significant computational effort, which in turn leads to high energy consumption.

Blockchains using the Proof of Work mechanism have virtual miners update the blockchains with the latest verified transactions while they get awarded with a certain amount of native cryptocurrency by the network as per its protocols. In this system, ‘miners’ are chosen based on their speed in solving a computational puzzle using high-powered computers. As the network expands, mining difficulty increases, ensuring only advanced mining rigs and data centers can generate a hash value below the network’s target. And as the network grows, more miners would join the network ultimately increasing the security of the blockchain.

2. Proof of Stake

In the Proof of Stake consensus mechanism, participants are chosen to serve as validators (instead of miners) for the blockchain based on a certain amount of their cryptocurrency they ‘stake’ or lock up as collateral. These validators are responsible for verifying recent transactions and updating the blockchain. As compensation for their services, they also earn cryptocurrency as rewards.

Proof of Stake is a more recent consensus mechanism embraced by modern blockchains. It’s also environmentally friendlier due to its reduced reliance on energy-intensive computers and processing power. PoS networks usually select participants as primary validators based on several factors on the amount of crypto they have staked on the chain as mentioned, while other smaller validators get to check whether the latest validation is accurate. The rewards are distributed proportionally to each validator’s stake in the reward pool.

Why Do You Require Layer 1 Blockchain?

Blockchain technology offers numerous advantages. These include increased security, improved record keeping, and hassle-free transactions. Applications and solutions developed on top of Layer 1 are intrinsically tied to its foundational architecture and principles. This means that their core features, functionalities, and advantages are often a direct result of the Layer 1 blockchain’s capabilities. For instance, the security, speed, or decentralization attributes of a Layer 1 blockchain will directly influence the performance and trustworthiness of the applications built upon it. As such, these applications not only integrate with but also heavily rely on the robustness and innovations provided by the underlying Layer 1 platform.

Moreover, Layer 1 blockchains play a pivotal role in fostering interoperability within the Web3 ecosystem. They serve as the bedrock, establishing standardized protocols that allow diverse applications and even other chains to communicate and share data seamlessly. Similar to the Web2 world, atomic swaps and synthetics are used frequently in blockchain ecosystem to transport value, albeit, without a middleman. By providing a reliable and transparent consensus mechanism, Layer 1 blockchains ensure the immutability and verifiability of data — essential traits for trust in decentralized systems. Additionally, their native tokenomics often play a role in incentivizing network participation, governance, and overall ecosystem growth, acting as the economic backbone that drives sustainability and innovation in the Web3 space

What are the Limitations of Layer 1 Blockchain?

After Ethereum introduced smart contracts and proved to the world that blockchains have use cases beyond just peer-to-peer payments in the form of dapps, layer 2’s, NFTs among others, the users and the volume of transactions have significantly increased. With the increasing number of blockchain users, Layer 1 is still playing catch-up since it the technology was introduced focused only on security and decentralization right after the 2008 financial crisis. As a result of a rapidly expanding ecosystem, processing speeds and capacities of layer 1 networks have slowed or throttled leading to congestion, outages and high transaction costs. Today, layer 1 blockchains can only process a limited number of transactions per second (TPS). Even the more modern platforms can process an average of 400 TPS when the centralized peers like Visa and Twitter can process an average of 5000 TPS.

Unless the scalability or blockchain trilemma is solved, layer 1 networks ultimately end up compromising decentralization, security or scalability – and transaction fees.

Components of L1 Blockchain

Some of the key elements of L1 blockchains are:

  1. Consensus Mechanism– To tackle the absence of a centralized authority which can verify the authenticity of a transaction, a consensus mechanism is used. Here, the network users (nodes) themselves validates the transactions and can add transactions to the network securely.
  1. Data Structure- The data gets stored on a blockchain network in the form of a ledger that is publicly accessible and records each and every transaction made on it. This characteristic establishes the blockchain as a “distributed ledger.” Each node in the network holds a copy, either partial or complete, of this ledger, ensuring decentralization and providing ample redundancy to safeguard against potential node failures or crashes and security attacks.
  1. Cryptographic Primitives- Most blockchains use asymmetric key cryptography for safeguarding the network, which contains both private and public keys to allow users access to transactions on the network – right from initiation of the transaction by a user to confirmation of transaction. Cryptography/hashing algorithms are crucial for having a robust security system in place to ensure every transaction made on the blockchain gets encrypted and is linked with these respective keys for users.
  1. Transaction finality- Similar to how a bank transfer becomes irreversible once money is sent, transaction finality in blockchains ensures that your transaction is permanent and cannot be reversed. The blockchain’s architecture dictates the transaction’s completion time, and only on the L1 blockchain is this transaction ultimately finalized, even if its processing occurred on a different layer.
  1. Native assets- These include coins like bitcoin (BTC) and Ether (ETH) which you use for paying the transaction fees and for rewarding the validators (miners in the case of PoW) networks on L1 blockchains.
  1. Security- The security of a blockchain network is guided by standard protocols which are determined by L1 blockchains in consensus with the platform nodes. These parameters involve the kind of consensus mechanism which is used by the network. This includes rules regarding how the validators will interact on a network. L1 blockchain basically provides the inherent security apparatus as far as the security of its ecosystem is concerned.
  2. Block production- A block is a data structure which is produced by validators and is an individual unit of the entire blockchain network. Each block contains a reference to the blocks which were generated previously along with information about new transactions. These blocks are always recorded on the layer 1 blockchain of a blockchain ecosystem.

Layer 1 Vs. Layer 2 – What’s the Difference?

Layer 1 vs. Layer 2
Source: Quora | Layer 1 blockchain and Layer 2 blockchain enhance the scalability of the base layer protocol differently

Layer 1, often referred to as the base layer, forms the foundational protocol of a blockchain system. It’s where the primary consensus mechanism operates, whether that be Proof of Work (like in Bitcoin) or Proof of Stake. This base layer is responsible for the core processing and recording of transactions directly on the main chain. It ensures the decentralization, security, and overall integrity of the system. The scalability and performance of Layer 1 are often constrained by its design principles, which prioritize security and decentralization. Examples of Layer 1 blockchains include Bitcoin, Ethereum, Avalanche, Algorand etc.

Layer 2 blockchains are built on top of existing blockchain networks. They use a variety of techniques to improve scalability, such as off-chain channels, state channels, and rollups. Layer 2 blockchains are often faster and cheaper to use than Layer 1 blockchains, but they can be less secure or decentralized especially when they use their own customized consensus algorithm and integrations independent of the base layer. Examples include the Lightning Network for Bitcoin or the various rollups for Ethereum. These solutions offload some of the transactional load from the main chain by processing transactions off-chain or in a more efficient manner, and then later committing or settling those transactions on the Layer 1 blockchain. This hierarchical approach allows for greater throughput and flexibility while leveraging the trust and security of the primary blockchain.

👀Still curious to know more about the difference between L1 & L2 blockchain? Read this article on Layer 1 and Layer 2 Blockchain.

Benefits of Layer 1 in Blockchain Solutions

  1. The most obvious benefit of Layer 1 blockchain solutions is scalability. Layer 1 blockchains are intended to make blockchain networks more responsive to a rapidly growing user base. A Layer 1 blockchain protocol provides high throughput (although with limited scalability) and is fundamentally viable for decentralization and security.
  2. A key strength of Layer 1 blockchains lies in their standalone completeness; there’s no requisite for supplementary layers atop their existing framework unless the situation demands. Layer 1 scaling solutions enable the seamless integration of new tools and technological advancements directly into the base protocols. As such, they serve as an essential bedrock for fostering innovation throughout the blockchain landscape
  3. As they are the only ones who have access to the source of truth, Layer 1 blockchains are the final arbiters of transaction outcomes. You’ll find a native token on Layer 1 networks that allow you to access the network’s resources.

List of Layer 1 Blockchains

You can quickly scan through the layer 1 blockchain list mentioned below:

  1. Bitcoin
  2. Ethereum
  3. Shardeum
  4. Elrond
  5. Harmony
  6. Celo 
  7. THORChain 
  8. Kava
  9. IoTeX 
  10. Algorand

Layer 1 Blockchain Examples

Layer 1 Blockchain Examples

When comparing layer one networks, it is critical to understand the consensus mechanism and the benefits or drawbacks that it offers. Let’s have a look at the Layer 1 blockchain list:

1. Bitcoin

Bitcoin
Source: Freepik

Bitcoin is also a Layer 1 blockchain, where its base layer, called Layer 1, is responsible for all on-chain transactions. Since it works on a Proof of Work consensus mechanism, its transactions are intensive computationally. Yet, Bitcoin is considered one of the most secure and decentralized Layer 1 blockchain. The Layer 1 of the Bitcoin network is also where miners and nodes participate and add blocks while validating transactions.

2. Ethereum

Ethereum
Source: Freepik

Ethereum is like a super-powered computer that many people can use at the same time. It’s special because it can run programs called ‘smart contracts’ automatically. Imagine setting up a rule like ‘if this happens, then do that’ – that’s kind of how these contracts work. They only run when certain conditions are met. Previously, Ethereum operated on a consensus model akin to Bitcoin’s. However, its transition to Proof of Stake (PoS) marks not only a reduction in its environmental footprint but also a significant advancement for the blockchain sector. With Ethereum pioneering an expanded range of applications and increasing transaction capabilities, it’s shifted the narrative on that space.

Further, Ethereum’s introduction of programmable smart contracts revolutionized the possibilities within the blockchain realm, turning it into a platform for decentralized applications (dapps) beyond just a simple transactional system. This transformative approach, fostering a vast ecosystem of projects and tokens, has set a benchmark in the industry, with many newer blockchains drawing inspiration from Ethereum’s innovative blueprint

3. Shardeum

Shardeum

Shardeum is the first layer 1 smart contract platform that scales linearly. The EVM-based network provides low gas fees while maintaining true decentralization and solid security through dynamic state sharding. Every node that joins the Shardeum network immediately increases the transactions per second (TPS) and the total capacity of the network to achieve linear scaling. This ensures low transaction fees even as the usage grows. Further, it offers a high level of security and decentralization to its users by employing a leaderless Proof-of-Quorum (PoQ) consensus algorithm. Also, Proof-of-Stake (PoS) with slashing, standby nodes, node rotation, and permissionless participation contribute to increasing the security of the network.

4. Elrond

Elrond
Source: Freepik

Elrond is a layer-1 network that was founded in 2018. It employs sharding to improve performance and scalability. Elrond’s blockchain can be scaled to handle a very high transactions per second (TPS). Every six seconds, a new block of transactions is added to the Elrond blockchain. This Layer 1 blockchain has two distinct features: adaptive state sharding and the Secure Proof of Stake consensus mechanism. eGold is the platform’s native cryptocurrency. Elrond also supports decentralized applications via smart contracts.

5. Harmony

Harmony
Source: Freepik

Harmony is a layer-1 network that supports sharding and uses Effective Proof of Stake (EPoS). The mainnet of the blockchain has four shards, each of which creates and verifies new blocks in parallel. Because each shard can move at its own pace, it can all have different block heights. For the time being, the blockchain employs a Cross-Chain Finance strategy to attract users and developers. Above all, Harmony’s vision for blockchain scalability focuses on zero-knowledge proofs and Decentralized Autonomous Organizations, or DAOs.

6. Celo 

Celo
Source: Freepik

Celo is a fully EVM-compatible proof-of-stake layer-1 protocol with a fast, ultralight client designed for mobile. Celo’s network enables the development of decentralized apps (dApps). Most of the time, these decentralized applications are used for community-driven projects and charitable purposes. Celo also lowers the complexity barrier for new users by allowing you to use your phone number as your public key. Celo employs an on-chain public key infrastructure that connects phone numbers to public keys. This feature makes it simple to send money to contacts on your phone, regardless of whether they have a cryptocurrency wallet.

7. THORChain 

Thorchain
Source: Freepik

THORChain is an independent Layer 1 blockchain built on the Cosmos SDK and Tendermint. It acts as a permissionless decentralized cross-chain exchange (DEX). The THORchain DEX, like Uniswap or SushiSwap, allows anyone to trade or lend their crypto assets by providing liquidity to an asset pool and, in exchange, earn a yield on those assets. Unlike other cross-chain protocols, THORChain does not wrap assets before swapping. Instead, it uses native assets on THORChain to perform autonomous, transparent asset swaps. Its protocol includes a cross-chain bridge system (known as the Bifröst Protocol) to connect different chains. To facilitate asset exchange, THORChain also employs an adapted version of Bancor’s ‘smart tokens,’ dubbed Continuous Liquidity Pools (CLPs).

8. Kava

Kava
Source: Freepik

Kava is a lightning-fast Layer 1 blockchain. It has a developer-optimized co-chain architecture that combines the two most popular permissionless ecosystems – developer support from Ethereum and speed and interoperability from Cosmos – into a single, scalable network. The Kava Network employs a ‘co-chain’ architecture, with a separate blockchain for the EVM and Cosmos SDK development environments. It provides distinct blockchains for EVM environments as well as Cosmos SDK development environments. The Kava Network offered open, on-chain developer incentives designed to reward the top 100 projects on each co-chain based on usage. It is funded by KavaDAO.

9. IoTeX 

Iotex
Source: Freepik

IoTex is an EVM-compatible Layer 1 blockchain network. It elevates the internet of things (IoT) landscape to a new level. It aspires to create a connected world in which machines, humans, businesses, and decentralized applications (dapps) can interact with trust and privacy. The IoTeX blockchain already powers real devices, such as award-winning blockchain-powered cameras from the Consumer Electronics Show (CES) and the pebble geo device, which is ideal for supply chain optimization in any industry. IoTeX takes data from billions of IoT devices around the world onto the blockchain and creates a verifiable ‘single version of the truth’ for the assets.

10. Algorand

Algorand
Source: Freepik

Algorand is a layer 1 blockchain protocol that uses a modified Pure Proof of Stake (PPoS) consensus. A PPoS mechanism will allow every ALGO holder, even with one ALGO token, to earn rewards when the blockchain protocol is used by people. This arrangement lowers the barrier to entry for staking on Algorand. However, such a low barrier to entry may make the network vulnerable to malicious actors. 

Algorand uses a two-tier architecture to make itself more scalable. The first tier is reserved for more complex transactions related to Defi protocols, whereas the second tier or chain handles simple transactions like token transfers. This two-tier mechanism allows Algorand to achieve a high TPS outperforming older chains like Ethereum. However it hosts fewer dapps and solutions over it compared to on Ethereum. So whether it can scale at size as the usage of the network grows, remains to be seen.

Frequently Asked Questions (FAQs)

1. What is the Difference Between Layer 1 and Layer 2?

Layer 1 blockchains form the base layer, where primary consensus mechanisms operate, ensuring decentralization, security, and core transaction processing. Examples include Bitcoin and Ethereum’s mainnet. In contrast, Layer 2 solutions are secondary protocols built atop Layer 1 to enhance scalability and speed without compromising base layer security. These solutions, like Lightning Network or rollups, handle transactions more efficiently, offloading some of the main chain’s burdens, and later settling those transactions on Layer 1. This layered approach facilitates greater transactional throughput.

2. What are the Best Layer 1 Blockchains? 

There is a long list of layer 1 blockchains out there attempting to get their respective main chains to increase their scalability. A few of the prominent ones we have today include Bitcoin, Ethereum, Elrond, Harmony, Celo, THORChain, Kava, IoTeX, Algorand, and Shardeum.

3. What is the Fastest Layer 1 Blockchain? 

There are quite a few layer 1 blockchain solutions out there that are working towards towards massive scalability to onboard billion more users to Web3, we will need to patiently wait and see which networks come out on the top when it comes to both scalability and throughput without sacrificing high decentralization and security. 

4. What is the Purpose of Layer 1 Blockchain?

The primary purpose of Layer 1 blockchain is to serve as the foundational layer of a blockchain system, ensuring security, decentralization, and integrity. It operates the core consensus mechanisms and processes transactions directly on its main chain. This layer is responsible for establishing trust within the network, validating and recording transactions, and maintaining a consistent and immutable ledger. Layer 1 sets the fundamental rules and standards, making it the bedrock upon which secondary layers and applications can be built. It’s crucial for the overall stability and reliability of a blockchain ecosystem

5. How Many Layer 1 Blockchains Exist?

As of today, there are over 10,000 systems utilizing blockchain technology, with a significant portion of them functioning as layer 1 solutions. These layer 1 blockchains serve as the foundation for various decentralized applications and have attracted a substantial user base, with approximately 81 million crypto wallet users distributed across these diverse networks.

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