Following our previous article on blockchain layers, we dive into layer 1 blockchains that provide the foundational structure or building blocks upon which the entire decentralized ecosystem is built.
They offer the security that allow the creation and operation of decentralized applications (dApps) and cryptocurrencies.
With notable examples of layer 1 blockchains like Bitcoin, Ethereum, Cardano, Polkadot, BNB Smart Chain, Solana, the crypto industry has witnessed the rise of new and improved L1s such as Aptos, Sui,etc.
Given the ongoing developments and innovation in the blockchain industry, the world of Layer 1 chains continues to change the decentralized blockchain environment.
What is a Layer 1 Blockchain?
Layer 1 is the primary blockchain network where transactions are recorded and validated. It is the base layer and level that the fundamental consensus mechanism, such as Proof of Work (PoW) or Proof of Stake (PoS), is applied to secure the network and validate transactions (verify transactions on the block).
This set of blockchains are created to be highly secure, decentralized, and immutable (transaction information remains unchanged).
In describing different Layer 1 blockchains, there are distinct features that set them apart, but in general, they have key components that position them as a Layer 1.
Components of Layer 1 Blockchains
- Consensus Mechanisms
Layer 1 chains use various consensus mechanisms to verify and record transactions. The common methods are Proof of Work (PoW), used by Bitcoin, and Proof of Stake (PoS), embraced by Ethereum and several others such as BNB chain, Polkadot, Avalanche, e.t.c. These mechanisms provide decentralization, trust, and security within the network.
2. Decentralization
One of the basic principle of Layer 1s is decentralization. They depend on a network of nodes (computers), distributed worldwide to work and maintain security. These nodes verify and confirm transactions, ensuring decentralization, which also helps to avoid single points of failure.
3. Security
At the fundamental level, security is a priority for Layer 1 blockchains. This is achieved through cryptographic algorithms and consensus mechanisms. For instance, Bitcoin, the first Layer 1 blockchain, uses PoW to secure its network, making it resistant to attacks.
4. Blockchain Protocol
A Layer 1 blockchain is defined by its protocol which explains how data is structured, stored, and managed. It includes rules for creating and validating blocks, as well as the format for ordering blocks of transactions.
Each blockchain has its unique protocol.
5. Immutability
Transactions recorded on the ledger of layer 1s are nearly immutable, meaning that once a transaction is confirmed, it cannot be altered or deleted. This feature is necessary for maintaining trust in the blockchain
6. Cryptocurrency or Native Asset
Layer 1 chains mostly have their native cryptocurrencies or tokens. These digital assets facilitate transactions within the network and are often used as fees and governance in the decision-making process.
How Layer 1 Blockchains Work
The basic working principle of Layer 1 chains can be understood from the transactions a user executes in a wallet.
So, for every wallet application, there’s a private key or secret phrase that protects it. Users are able to access the wallet and initiate transactions. The transactions are then verified by nodes on the blockchain network the user interacts with.
With varying consensus mechanisms (for example, PoW or PoS) on the blockchains, nodes (computers) agree on which transactions should be included in the next block. This confirms if a transaction will be successful or not.
The validated transactions are grouped into blocks, and miners (in PoW) or validators (in PoS) compete to create the next block by solving complex mathematical puzzles or staking assets, respectively.
Once a block is created and agreed upon by the network validators or miners, it is added to the blockchain. This process ensures immutability and security.
Benefits of Layer 1 Blockchains
Layer 1 blockchains are fundamentally secure due to their decentralized nature and cryptographic mechanisms. They are resilience to hacking and fraud.
By nature, their decentralization helps remove the need for intermediaries, thereby promoting transparency.
Transactions on Layer 1 blockchains are nearly impossible to alter, providing valid and authentic records of history.
In addition, they serve as platforms for innovation, enabling the creation of decentralized applications (dApps) and new financial instruments.
Limitations of Layer 1 Blockchains
The primary limitation to many Layer 1 blockchains is scalability issues, which leads to slower transaction processing times and higher fees during network congestion or overload.
More so, userbility and global adoption are often limited by environmental concerns. PoW-based blockchains like Bitcoin have faced criticism for their significant energy consumption and carbon footprint.
By virtue of their structure, understanding and developing on Layer 1 blockchains can be complex, limiting accessibility for some users and developers.
Scaling Layer 1 Blockchains
Going by the primary limitation of Layer 1 blockchains, scalability challenges develop as blockchain adoption grows.
Scaling refers to the ability of a blockchain network to handle a growing number of transactions and users while maintaining efficiency.
Reasons for scaling Layer 1 blockchains include:
- Transaction Speed
Traditional Layer 1 blockchains such as Bitcoin and Ethereum have relatively slow transaction processing times. They can handle only a handful of transactions per time.
As a result, many scaling solutions have been developed on these traditional blockchains especially Ethereum.
In recent times, developments in the blockchain industry have seen the likes of Solana outpace old chains in transaction speed per time (TPS).
2. High Fees
Congestion on these networks often lead to increased transaction fees. During peak times, users may have to pay huge fees to have their transactions processed on time.
3. Energy Consumption
PoW-based blockchains like Bitcoin are energy-intensive, raising environmental concerns due to their substantial energy consumption.
Layer 1 Scaling Solutions
To overcome these limitations and make Layer 1 blockchains more scalable, various approaches and innovations have emerged:
Sharding is a technique used to separate parts of a blockchain into smaller, more manageable segments or “shards.” Each shard processes different sets of transactions, significantly increasing the network’s throughput (rate at which transactions are processed).
- Layer 1 Scalable Protocols
Some Layer 1 blockchains, such as Solana and Polkadot, have been designed with scalability in mind. Solana, for instance, uses a unique combination of PoH (Proof of History) and PoS to achieve high throughput.
Projects like Polkadot and Cosmos seek to improve scalability by connecting multiple blockchains, allowing them to work together seamlessly. This allows different blockchains to handle specific functions and share data.
Conclusion
Layer 1 blockchains lay the groundwork for every other decentralized system. They provide the essential infrastructure and security required for a wide range of applications beyond cryptocurrencies, including finance, gaming, supply chain management, and more.
However, as the blockchain ecosystem expands, scaling issues have become prevalent with a rising user base.
More innovative Layer 1 protocols and scaling networks have been developed to solve this scalability problem.
These Layer 1 protocols and scaling networks work to enhance transaction speeds, reduce fees, and correct environmental problems, making blockchain technology more accessible and efficient.
As the blockchain space continues to evolve, the importance of Layer 1 blockchains as pioneers of decentralization and scaling solutions becomes more apparent.
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