In an era where Web3 is filled with potential and promise, users often navigate the maze of technical jargon, struggling to discern what truly matters in the blockchain world.
Amidst this are terms like
Layer Zero – L0
Layer One – L1
Layer Two – L2
Layer Three – L3
But what do they signify?
Why are they pivotal in shaping our Web3 experiences?
This article will clarify the significance of these layers and demystify their roles in how the success of Web3 is reliant on the success of these blockchains.
I will start like this. For a better understanding.
What is Layer One, Layer two, Layer three and Layer Zero?
Layer 1 blockchain, often referred to as L1, describes the foundational layer of blockchain architecture.
It’s the base layer where the primary blockchain protocol runs.
Here’s a breakdown of the components of an L1 Blockchain.
Foundation: Layer 1 is the underlying main blockchain architecture. Think of it as the primary infrastructure on which the blockchain operates.
Imagine a vast piece of land that’s the foundation for building a skyscraper. Layer 1 is like this land, providing the base on which everything else stands.
Consensus Mechanisms: The rules for validating and adding transactions to the blockchain are defined within this layer.
Common consensus mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) operate at this level.
Consider a committee that decides which bricks are the right quality for constructing the skyscraper.
In blockchain, this “committee” is the consensus mechanism, deciding which transactions get added.
Security: Layer 1 is responsible for the blockchain’s security.
The more decentralized and distributed a blockchain network is, the more secure its foundational layer tends to be.
Think of a guarded perimeter around the construction site, ensuring no unauthorized access.
Similarly, Layer 1 has robust security protocols to guard against malicious activities.
Native Tokens: The native cryptocurrency or token of a blockchain platform (e.g., Bitcoin for the Bitcoin blockchain, Ether for the Ethereum blockchain, Solana for the Solana blockchain) operates on this layer.
Visualize a currency accepted within the skyscraper’s premises, like an internal credit system.
Scalability Issues: Many of the challenges associated with scalability stem from Layer 1.
As a result, some platforms have looked towards Layer 2 solutions to address these issues.
Imagine the skyscraper’s elevators being too slow when too many people want to use them.
This congestion is akin to scalability issues on a blockchain where too many transactions can slow down the system.
Upgrades and Changes: Significant changes or upgrades, often called “hard forks” or “soft forks,” occur at this layer.
For example, Ethereum’s evolution from a PoW to a PoS consensus mechanism is a Layer 1 upgrade.
Picture significant renovations to the skyscraper, like adding more floors or a new wing. In blockchain terms, these significant modifications or upgrades are changes to Layer 1.
What is Layer 2?
Layer 2 blockchain, often called “Layer 2 solutions” or simply “L2,” refers to a secondary framework or protocol built on top of an existing blockchain system.
The primary purpose of these solutions is to address and mitigate the scalability and cost issues associated with the main blockchain (often called L1) without compromising security.
A lot of VCs have invested in various Layer 2 such as Arbitrum, Optimism, ZkSync, Linea, Scroll, etc for the purpose of scaling Ethereum.
Layer 2 solutions are critical for the scalability of blockchain networks, enabling them to handle more users and applications, making blockchain tech more possible for mainstream adoption.
Imagine a bustling city centre (our Layer 1) with just one major highway leading in and out.
When there’s a festival or a big event, traffic gets backed up, and movement becomes slow and costly.
Now, envision multiple speedy skyways or express lanes (our Layer 2 solutions) built above this main highway.
These lanes allow cars (transactions) to move swiftly without getting caught in the main road’s congestion.
They can bypass the jam below, only merging back into the main road when they need to exit the city.
Here’s a deeper dive into L2
Purpose: The primary blockchain networks, like Ethereum and Bitcoin, often face issues related to slow transaction speeds and high fees, especially during network congestion.
Layer 2 solutions aim to alleviate these problems.
Like our city needs those express lanes to manage festival traffic, the blockchain requires Layer 2 solutions to handle high transaction volumes and avoid slowdowns.
How It Works: Instead of processing every transaction on the main chain (L1), Layer 2 solutions process most transactions off-chain and batch them into a single transaction recorded on the main chain.
This dramatically increases transaction throughput and decreases associated costs.
Components of Layer 2 solutions:
State Channels: These are opened between two participants as a multi-signature wallet.
Transactions between these participants occur off-chain and are only settled on the main chain once the channel is closed.
Examples include the Lightning Network for Bitcoin and the Raiden Network for Ethereum.
Think of them as private express lanes reserved just for two cars. They zoom past and only merge back when they’re done racing.
Sidechains: These are separate blockchains that run parallel to the main chain.
They have their consensus models and can process transactions independently. Pegged assets are used to move assets between the main chain and the sidechain.
An example is the Liquid Network for Bitcoin.
The Main City and Its Suburb (Sidechain Illustration)
Imagine a bustling city named “MainCity” representing the primary blockchain (Layer 1).
MainCity is where most of the action happens; it’s crowded, full of important buildings, and significant business transactions occur.
However, due to its importance and bustling nature, moving around can be slow and expensive due to traffic jams.
Now, just outside MainCity, a suburb named “SuburbChain.”
This suburb represents the sidechain. SuburbChain is quieter and less congested than MainCity. It has its local governance, roads, and a community that operates independently.
Yet, it’s connected to MainCity by a highway, allowing for movement between them.
MainCity residents who find the traffic and congestion too much to handle for certain tasks decide to move to SuburbChain for those specific activities.
In SuburbChain, they can move faster, achieve tasks more efficiently, and face fewer traffic jams. Once they’re done, they can quickly return to MainCity using the connecting highway.
In blockchain terms:
MainCity: The main blockchain (e.g., Ethereum).
SuburbChain: The sidechain which operates alongside the main blockchain.
Highway: Represents the ‘pegging’ mechanism that allows assets (like tokens) to move between the main blockchain and the sidechain.
Rollups: Rollups can batch multiple off-chain transactions into a single on-chain transaction.
All transaction data is stored on-chain, but the computation is performed off-chain.
Examples in the Ethereum ecosystem are Optimistic Rollups and zk-Rollups.
Imagine a busy coffee shop where a barista writes each customer’s order meticulously.
Instead of shouting out each order for another barista to make, this barista groups ten orders together and summarizes them: “5 lattes, three espressos, and two cappuccinos.”
This summary (or “rollup”) is then passed to the other barista, who makes the drinks based on the summarized information.
By batching orders in this manner, they save time and become more efficient.
Plasma: It’s a framework primarily designed for Ethereum that allows for the creation of child chains, processing transactions in a way that results in fewer main chain confirmations.
Imagine a large tree, where the trunk represents the main Ethereum blockchain(L1).
Each branch stemming from this trunk symbolizes a Plasma “child” blockchain.
These branches (child chains) can have smaller branches (sub-chains), and so forth.
Now, every leaf on a branch represents an individual transaction.
Instead of marking every leaf onto the trunk (which would be cumbersome), only the collective state of all leaves on a specific branch is inscribed on the trunk.
If there’s ever a disagreement about a leaf’s details, you will trace it back to the branch it’s attached to for verification. If the branch can’t resolve the disagreement, you’d go to the trunk (main chain) to settle it.
In this way, Plasma allows many transactions (leaves) to be processed off the main chain (trunk) while maintaining the primary blockchain’s security and integrity.
This analogy aims to simplify the intricate workings of Plasma, making it more digestible for those unfamiliar with the concept.
Allow communication and interaction between different Layer 1 blockchain and Layer 2 solutions.
They ensure that assets and information can flow seamlessly across diverse blockchain ecosystems.
Liquidity Pools & Bridges:
Facilitate the transfer of assets between Layer 1 and Layer 2 solutions.
They provide the necessary liquidity and ensure assets are readily available when users want to move them across layers.
Security and Fraud Proofs:
Even though transactions mainly occur off the main chain(L1), Layer 2 solutions leverage the security guarantees of the main chain.
The idea is to have the best of both worlds: speed and security.
Mechanisms to ensure that transactions on Layer 2 solutions are secure and legitimate.
They offer users a way to challenge invalid transactions and maintain the system’s integrity.
It’s essential to understand that while Layer 2 solutions enhance scalability, they come with their trade-offs, especially in security and decentralization.
Depending on the specific Layer 2 technology, these trade-offs can vary.
What is Layer 3?
Layer 3, called L3 in speculative discussions, is sometimes imagined as a layer that would build upon Layer 2 solutions, offering even further scalability, specialized applications, or cross-chain functionalities.
These could be more complex dApps, decentralized services, or aggregators that operate seamlessly across multiple Layer 2 solutions.
With the high transaction fees and scalability issues the Ethereum blockchain is facing, it will be difficult for gaming projects to function effectively on the chain.
This is because gaming projects require more transactions consistently other than what the Ethereum blockchain can handle.
However, the solution is building projects on Layer 2 blockchains.
L2 blockchains can handle more and faster transactions that are suitable for building any L3 project, especially gaming projects.
What is Layer Zero?
LayerZero is not always discussed or highlighted as much as Layer 1 (base layer blockchains like Ethereum or Bitcoin) and Layer 2 (scaling solutions like rollups). Layer 0 plays a crucial role in blockchain technology.
Layer 0 is a foundational layer in the blockchain and distributed ledger technology (DLT) stack, focusing primarily on networking and communication protocols.
Blockchains are not compatible with each other.
You cannot move assets from the Ethereum blockchain to the Solana blockchain.
You cannot move assets from Avalanche to Aptos blockchain because each blockchain was built to accept applications built with their coding language and ecosystem.
It’s just like you sending files from an Android to an iPhone. It isn’t straightforward.
What Layer 0 blockchain does is it gives several blockchains the ability to move assets from one blockchain to another without trading security, decentralization, or scalability.
Let’s assume that L0 is underground. Deep below the city streets lie subway tunnels and underground pathways.
These tunnels allow trains (cryptocurrency and data packets) to travel efficiently across the city (network).
Like subway systems connect different parts of a city, Layer 0 connects different parts of the blockchain, ensuring messages are transmitted smoothly.
Characteristics of L0.
Networking & Communication Protocols: Layer 0 provides the necessary infrastructure for nodes in a blockchain network to communicate with each other.
This includes protocols for transmitting and receiving messages, maintaining network connectivity, and ensuring data synchronization across nodes.
Decentralization and Scalability: Some blockchain projects aim to improve decentralization and scalability at Layer 0.
By optimizing the underlying network infrastructure, these projects believe they can achieve better performance at the upper layers of the stack (Layer 1 and Layer 2).
Interoperability: As the blockchain ecosystem grows and multiple chains emerge, the ability for these chains to communicate and interact becomes crucial.
Layer 0 solutions might also involve protocols allowing cross-chain communication and interoperability.
Security and Resilience: At this layer, protocols can be developed to make the network more resistant to attacks, failures, and vulnerabilities.
Bootstrapping and Peer Discovery: For a node to participate in a blockchain network, it must first discover other nodes.
Layer 0 protocols can facilitate this peer discovery process, allowing nodes to find and connect efficiently.
While often associated with interoperability at Layer 1, projects such as Polkadot and Cosmos tackle Layer 0 issues by ensuring multiple blockchains communicate and interoperate efficiently.
In essence, while Layer 1 and Layer 2 solutions receive significant attention due to their direct impact on user experiences and dApp functionality, Layer 0 serves as the foundational layer that supports and enhances the capabilities of these upper layers.
Without a robust Layer 0, the entire blockchain stack could suffer from inefficiencies, vulnerabilities, or limitations in scalability and performance.
How Do These Blockchains Affect Mainstream Adoption?
Imagine trying to make an online purchase with your Mastercard, but the fees are high than the product you want to buy.
One of the significant challenges for many blockchains, especially those that rely on proof-of-work like Bitcoin, is the ability to process many transactions quickly.
The system can become congested as more users join, leading to slow transaction times and higher fees.
Ethereum has migrated to proof of Stake, yet it doesn’t solve the problem.
Layer 2s have been developed to help the Ethereum blockchain process several transactions.
And then we have other blockchains that don’t need the layers on Ethereum building blockchains that would process transactions fast and cheaper.
However, the problem is that these blockchains act in a silo. They can’t easily communicate or share data with other blockchains.
Layer 0 solves this problem.
With the development of Layer 2s and alternative Layer 1 blockchain, the blockchain industry can process transactions faster and cheaper.
Users can also enjoy the uniqueness of different blockchains without getting stuck using only one blockchain.
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