The difference between layer-1, layer-2 and Layer and Layer-3 Blockchains.

[TL; DR]

Layer-1 blockchains are the base protocols that handle most of the major functions.

The main function of Layer-2 blockchains is to increase the scalability of blockchains and enhance efficiency.

The Layer-3 blockchain is the infrastructure which hosts decentralized applications and facilitates communication among networks.

Bitcoin, Binace chain and Ethereum are examples of layer-1 blockchains.

Introduction

Layer 2 versus layer 3

When people use the blockchain they often face several challenges such as slow transactions and high gas fees. Most networks perform differently on these key aspects. Some of these functionalities depend on the architecture of the blockchain which include the type of consensus mechanism it uses. As part of their infrastructure, most major blockchains consist of different layers like layer-1, layer-2 and layer-3. This guide explores layers 1,2 and 3 and how they complement each other.

Layer1- blockchains

The layer-1 blockchain is the base or foundation of the entire web3 infrastructure. In other words, it is the blockchain upon which all other components exist. Some of the key components of the layer-1 architecture are hardware, consensus layer, network layer, application layer and data layer.

These basic blockchain components have different functions such as enhancing security, compatibility and communication. For instance, the consensus layer determines the speed and efficiency of transactions. Ethereum, Binance Chain and Bitcoin are examples of layer-1 blockchains.

Also, layer-1 blockchains provide security for decentralized applications that exist on them. In most cases, they approve the transactions carried on layer-2 blockchains. In addition, developers build decentralized applications on layer 1 blockchains.

What problems do layer-1 blockchains encounter?

Layer-1 blockchains face several problems such as scalability issues. This is because, in most cases, they do not have the capacity to handle large volumes of transactions at once. That is the reason why many such blockchains are slow and tend to have high transaction fees.

As well, layer-1 blockchains face blockchain trilema, meaning that they have to compromise one or two key aspects of the network namely, security, speed and scalability. What this means is that a blockchain which is scalable may have slow transactions or poor security or both. That is where layer-2 and layer-3 blockchains come in as they help to solve the problems of scalability, security, speed and interoperability.

Blockchain layers, 0,1,2 and 3- Zebpay

Layer-2 blockchains

The layer-2 blockchains provide scaling solutions to the entire network system. Basically, the layer-2 network runs on top of the main blockchain and increases scalability and efficiency of the entire system.

The layer-2 blockchain diverts transactions from the main blockchain thereby reducing network congestion and improving throughput in the process. They are like mini-blockchains that feed into the central chain. Although a blockchain may have various layer-2 systems; they perform different functions which improves the entire network.

It is important to note that most layer-2 solutions, usually, use off-chain mechanisms to increase speed and operational efficiency. For example, some of the layer-2 blockchains perform bulk transactions which they feed into the main blockchain in batches.

An example of the layer-2 network is Lightning that exists on the Bitcoin blockchain. As a fact, Lightning is a scaling solution that enables fast transactions and low transaction costs.