What is Layer 1 in Blockchain? An Ultimate Guide

While it is easy to see how revolutionary blockchain is, the scalability trilemma of ensuring scalability, security, and decentralization simultaneously has always been a challenge for blockchains. However, Layer 1 blockchains have emerged as a potential solution to the blockchain trilemma. But what is Layer 1 blockchain, and how does it work? Read till the end to know how Layer 1 blockchain protocols are set to bring a new wave in the crypto world.

What is Layer 1 in Blockchain?

Before diving deep into Layer 1 blockchains, let’s first understand, ‘what is Layer 1 blockchain?’ A Layer 1 blockchain refers to a base layer of a blockchain network and its underlying infrastructure. It is a collection of solutions that enhance the base protocol in order to make the overall network much more scalable. Such blockchain is called Layer 1 because they are the primary networks in their ecosystem.

The primary feature of a public decentralized Layer 1 network is its consensus mechanism. Various consensus mechanisms offer varying levels of speed, security, and throughput. Layer 1 blockchains are the foundational blockchains that process and record transactions in their respective ecosystems. They include a native cryptocurrency that is typically used to pay fees and provide additional functionality. Popular networks such as Bitcoin, BNB Chain, or Ethereum use the Layer 1 blockchain.

Why Do You Require Layer 1 Blockchain in 2023?

Blockchain technology offers numerous advantages. These include increased security, improved recordkeeping, and hassle-free transactions. Scalability is critical for facilitating the addition of new applications on a blockchain network, as well as increased frequency of user activity. The various steps required for blockchain transactions frequently consume a significant amount of time and processing power.

However, the Layer 1 blockchain is designed specifically to address this transaction-capacity issue. It is capable of exponentially increasing the scaling limits of blockchain and making significant progress. A Layer 1 blockchain can assist in increasing a network’s capacity to meet new processing speed and power requirements.

What are the Limitations of layer 1 blockchain?

Layer 1 blockchain alters the underlying blockchain protocol to enable scalability. Before a transaction is validated, it is verified by multiple nodes. Mining nodes compete to solve a complex computational puzzle. The miners who solve the puzzle first are rewarded in the network’s native cryptocurrency (e.g., ONE in the case of Harmony). The protocol’s rules are changed in these solutions to increase capacity and transaction speed, allowing for more data and users.

Also, with the increasing number of blockchain users, Layer 1 appears to be falling short. As the number of users has grown, so has the workload on Layer 1 blockchain. As a result, processing speeds and capacities have slowed. When the network is congested, users will experience slower confirmation times and higher transaction fees. The throughput is further slowed because Layer 1 blockchain still employs the clunky proof-of-work consensus mechanism.

Layer 1 Scaling

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 are also known as on-chain networks. In other words, some crypto protocols are layer-1 because they can process and complete transactions on their own blockchains. They also have their own native tokens, which are used for transaction fees. There are three common Layer 1 solution:

Modification of the consensus protocol
Increase block size to allow more transactions to be processed in each block
Sharding

SegWit

Now that we know ‘what is layer 1 blockchain?’, let’s also see an example. The list of layer 1 blockchains includes Bitcoin’s SegWit, which stands for ‘segregated witness’. SegWit worked to increase Bitcoin’s throughput by altering how data is organized and removing digital signatures as part of the input associated with a transaction. This freed up a lot more space on the network.

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

Both Layer 1 and Layer 2 solutions have distinct advantages and disadvantages. Layer 1 solutions entail changes to the base protocol of blockchain networks to improve scalability. Layer 2 solutions, on the other hand, are concerned with adding third-party integrations to the blockchain network’s mainnet.

Changes to the base protocol in Layer 1 blockchain, such as larger block sizes or new consensus mechanisms, can help with scalability. Off-chain solutions, on the other hand, improve scalability in Layer 2 by sharing the transaction ordering and processing workload.

These strategies are not mutually exclusive, and many blockchain networks are experimenting with Layer 1 and Layer 2 scaling solutions to achieve increased scalability without sacrificing adequate security or decentralization.

Lightning Network

Layer-2 solutions are always built on top of what is layer 1 blockchain, and thus are always also reliant on the layer 1 solutions to finalize any transactions passing through them. One well-known example of the same would be the Lightning Network associated with Bitcoin.

The Bitcoin network by itself might take a long time to process a transaction, especially when there’s heavy traffic. This is where the Lightning Network comes into play. It can allow you to make fast Bitcoin payments deviating from the main chain, and the transaction is later added to the main Bitcoin chain. This saves a lot of time and costs.

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

Types of Layer 1 Blockchain Solutions

Now that you know what Layer 1 blockchain is, let’s look at how a Layer 1 blockchain works. Layer 1 blockchains have a number of options for increasing throughput and overall network capacity. Layer 1 scaling solutions strive to improve the blockchain protocol’s infrastructure foundation in order to increase scalability. The following two are the most popular Layer 1 blockchain protocols:

1. Consensus Protocol

Some consensus mechanisms help blockchains outperform others. In the case of Proof of Work blockchains, switching to Proof of Stake could increase transactions per second (TPS) while lowering processing fees. While Proof of Work promotes decentralized consensus and security through cryptography, it has significant scalability drawbacks. PoS systems, on the other hand, process and validate new blocks of transaction data based on participants staking collateral in the network rather than requiring miners to solve cryptographic algorithms using significant computing power.

For example, with Ethereum 2.0, Ethereum will switch to a PoS consensus algorithm. It is expected to significantly and fundamentally increase the capacity of the Ethereum network. It is also expected to improve network decentralization and network security.

2. What is Layer-1 Sharding?

Sharding is a popular layer-1 scaling solution for increasing transaction throughput. 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.

In the case of Layer 1 blockchain sharding, each node does not need to keep a complete copy of the entire blockchain. On the contrary, nodes report completed work accounts to the main chain and share the status of local data such as address balances and other metrics. Along with Zilliqa, Tezos, and Qtum, Ethereum 2.0 is one high-profile blockchain protocol experimenting with shards.

Benefits of Layer 1 In Blockchain Solutions

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 and is economically viable for decentralization and security.

Another advantage of Layer 1 blockchain is that nothing needs to be added on top of the existing architecture. Layer 1 scaling solutions can aid in incorporating new tools, technological advancements, and other factors into base protocols. Therefore, we can say that they can provide a critical foundation for innovation across the blockchain ecosystem.

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.

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. Elrond

2. Harmony

3. Celo

4. THORChain

5. Shardeum

6. Kava

7. IoTeX

8. Algorand

1. Elrond

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 more than 100,000 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.

2. Harmony

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.

3. Celo

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.

4. THORChain

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).

5. Shardeum

Shardeum is the first linearly scalable smart contract platform that incorporates Layer 1 blockchain. 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 world-class security 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.

6. Kava

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 also offers open, on-chain developer incentives designed to reward the top 100 projects on each co-chain based on usage. It is funded by KavaDAO.

7. IoTeX

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. IoTeX is supported by renowned advisors such as Robert Parker, Jack Li, and Michael Cho, among others.

8. Algorand

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 TPS of up to 1,000, outperforming Ethereum’s TPS of 14’17 transactions. Algorand currently hosts over 100 DApps in comparison to Ethereum’s 3,000. If Algorand reaches the scale of activity Ethereum handles, will it be able to maintain its high TPS is yet to be seen.

Conclusion

The processing power and execution time of a blockchain transaction have a significant impact on the transaction’s authenticity and integrity. A successful streak requires transactions to be accepted, mined, distributed, and authenticated on a node network. Layer 1 blockchain aims to solve the blockchain trilemma by modifying the base protocol.

Layer 1 may be the most effective solution for large-scale protocol improvements. However, this also implies that validators must be persuaded to accept changes via a hard fork. However, as your understanding of blockchain layers grows, you will be able to find more effective ways to research new blockchain projects, particularly those that focus on network interoperability and cross-chain solutions.

Frequently Asked Questions (FAQs)

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

While both layer 1 and layer 2 solutions work to increase scalability on a blockchain, layer 1 solutions bring alterations to the base protocol of a blockchain network, where layer 2 solutions only add third-party integrations to a blockchain’s mainnet. The strategies are not mutually exclusive, and many blockchains experiment with both as a way to scale better.

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 best ones we have today would include Elrond, Harmony, Celo, THORChain, Kava, IoTeX, Algorand, Solana, Polkadot, and Shardeum.

3. What is the Fastest Layer 1 Blockchain?

There are quite a few layer 1 blockchain solutions out there that work to scale their respective blockchains and achieve faster transactions. While no clear comparison can be made between them to determine which one is the fastest layer 1 blockchain, Ethereum, Solana, Avalanche, Cardano, Polkadot, Algorand, Cosmos, and Shardeum are definitely among the ones ranking at the top.

4. What is the Purpose of Layer 1?

What is a layer 1 blockchain is designed mainly to solve the transaction-capacity issue on blockchain mainnets. A layer 1 solution can exponentially increase the scaling limits of a blockchain, and can also help with increasing the network’s overall capabilities when it comes to meeting advanced processing speed and power needs.

What is Layer 1 Blockchain in 2023?

What is Layer 1 in Blockchain?

Why Do You Require Layer 1 Blockchain in 2023?

What are the Limitations of layer 1 blockchain?