Alow, Alow! For those navigating the world of blockchain and cryptocurrencies, it’s common to see mentions of “layers,” such as Layer 2, which is currently being used by several companies to create solutions using blockchain technology.
Layer 0
Layer 0 of the blockchain is made up of the most basic parts of the blockchain such as hardware components, internet and connections, allowing networks to function.
Layer 1
Layer 1 protocols are like an implementation layer. In this layer we have the ‘consensus’ process, dispute resolution, blocking time and rules that keep blockchain networks functioning. Bitcoin and Ethereum are examples of Layer 1 blockchain.
More system layers that extend the blockchain, facilitating and allowing the creation of new services using the technology.
Layer 1 solutions have some problems and the biggest one is the scaling limitation that prevents the growth and use of the network in daily tasks. For example, the proof-of-work consensus is very secure but at the same time very expensive and cumbersome, each block contains a large amount of energy, reaching more than 266,000 kilowatt-hours (kWh).
The Proof-of-stake consensus type implemented in Etherium greatly reduced energy consumption and transaction costs, enabling the creation of new solutions on the network.
Layer 2:
Blockchain’s Layer 2 is like a “second layer” that overlays the main blockchain (Layer 1) to increase its scalability and efficiency.
Advantages of Layer 2:
- Scalability: Layer 2 can process a much greater number of transactions per second than Layer 1.
- Lower cost: Transactions on Layer 2 are generally cheaper than on Layer 1.
- Greater security: Layer 2 solutions can offer greater security than Layer 1 solutions, as in the case of sidechains and rollups.
Examples of Layer 2 solutions:
- Lightning Network (Bitcoin): Allows instant, low-cost payments in Bitcoin.
- Polygon (Ethereum): A platform that offers scalability solutions for Ethereum.
- Arbitrum (Ethereum): A Layer 2 solution that uses rollups to increase the scalability of Ethereum.
How Layer 2 works:
There are different types of Layer 2 solutions, but they all work by moving some of the workload from the main blockchain to the “second layer”. This frees up space on the main blockchain and allows it to process transactions faster.
Examples of using Layer 2:
- Payments: Layer 2 can be used to make quick and low-cost payments, such as in online games or purchases in virtual stores.
- Microtransactions: Layer 2 can be used to carry out microtransactions, which are very low value transactions, such as in music or video streaming applications.
- Decentralized applications (dApps): Layer 2 can be used to develop dApps that are more scalable and efficient than dApps that run on the main blockchain.
The future of Layer 2:
Layer 2 is still in development, but it has the potential to revolutionize the way we use Blockchain. Layer 2 solutions can help make Blockchain more scalable, efficient and secure, paving the way for mass adoption of the technology.
Challenges to be overcome
Despite the great potential, there are still some challenges that need to be overcome for Blockchain to reach its full potential and massive use. Some of the main challenges include:
- Security: Layer 2 solutions need to be as secure as Layer 1 solutions.
- Interoperability: Different Layer 2 solutions need to be interoperable so that users can exchange data and assets between them.
- Regulation: Regulation is still developing for the Blockchain layers, which can create uncertainty for companies and developers.
Although there are challenges to be overcome, the future of Blockchain is promising. With continued development and community collaboration, new Blockchain solutions and protocols can help take Blockchain technology to the next level and unlock its full potential.