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Exploring Layer 1 and Layer 2 and their use case scenarios.

“Layer 1” and “Layer 2” you sure would have heard these words before if you know a bit about crypto space. But what is it exactly?, How it helps the whole Web3?, What is their significance? Why is it important in today’s scenario?, These are the questions we will cover and a bit more. So get your favourite beverage. This is going to be one informative blog. Enjoy.

What is blockchain?

Let’s start with this question, what is blockchain? Well, blockchain is just a technology which enables the transparent distribution of data and decentralised power of adding on new data, which is out of the single-hand control of any party.

What we mean by that it is a technology through which we can store data in the form of blocks on a chain which is shared by all of the users on the blockchain. These users also have the power to add new legitimate data in the form of a block which is verified for correctness, and then the one who adds the new block is rewarded.

So by this comes the term “distributed ledger”. This is a fancy way of saying that we keep track of all the transactions on blocks of the chain, and anyone on the blockchain can view this, and no single party controls it. This is where the distributed or decentralised comes into the picture.

What is scaling?

By now, you must have a basic understanding of blockchain, but where does scaling come into the picture? We will explore that in this section of the blog.

You see, the machines part of the blockchain ecosystem are called nodes. These nodes are responsible for adding the new block and keeping track of the nodes. Now it is obvious that adding a new block in the blockchain takes time. This time can depend more or less on the underlying block addition mechanism.

When blockchain started, adding a new block took a lot of time; thus, everyone using the blockchain was charged a high gas fee. Why? When a new block is added, the data in the new block is picked based on who gives the most fee. The user who has to add the transaction or data to the block urgently gives more gas fees willingly. This is what creates a rise in gas prices.

From here, the gas fee rose as the resources or speed decreased. Thus, it became necessary to improve it, which is what scaling is. Scaling is the ability of that platform to support an increasing load of transactions and increase the number of nodes in the network. 

What are Layer 1 and Layer 2 in Blockchain? 

Now that you know about blockchain and what scaling is, it’s time to discuss what exactly are this Layer 1 and Layer 2.

Let me tell you a story. Once, a tortoise was harvesting crops from the field for the landlord and putting them in the basket at his back. As usual, he was very slow and timid. His friend rabbit saw him and decided to help the landlord. Still, the rabbit did not have a basket to collect crops, so while the tortoise was collecting crops and putting them in his basket, the rabbit, with his speed, collected crops in his hands. When his hands got full, put them in the tortoise’s basket; this way rabbit was helping the landlord of the field by collecting fast, taking the help of the rabbit’s basket.

This is exactly how Layer 1 and Layer 2 are connected. In this analogy, the landlord is the user, the basket is the blockchain, the tortoise is the layer 1, and the rabbit uses the blockchain or the basket to do the task quickly.

Layer 1 is the core blockchain like Ethereum, Bitcoin etc., and Layer 2 is a secondary framework or protocol that is built on top of an existing blockchain to speed up the transactions and improve on the scaling difficulty faced by the users.

Now, users like Layer 2 as it helps them with less gas fees and improves their experience. However, we can also improve upon Layer 1 to increase efficiency. Let’s see how that’s done.

Layer 1 Scaling Solutions

You might be thinking, why do we need Layer 2? Can’t we improve the core blockchain or Layer 1 in speed to achieve better scaling and better speed?

You are right. We can achieve that by some techniques on Layer 1 itself. Layer 1 scaling means improving the blockchain’s speed and efficiency by augmenting the blockchain’s base layer. Several methods are being developed and practised to do so; let’s discuss two of the most widely talked about.

1. Consensus Protocol Improvements:-

Starting with a light introduction of the consensus mechanism, it is an agreement of the nodes to add the block to the chain. You see, the blocks need to be correct to add to the chain because if any tampered block is added, it will create irregularities in the blockchain data. The nodes must agree that the added block is correct and legitimate to prevent that.

Now there are different types of consensus mechanisms which can be used. The most predominant ones are Proof-of-Work(POW) and Proof-of-Stake(POS); Proof of work has been in use for a while and requires very much of electronic resources and also, in a way, harmful to the environment plus the efficiency of blockchain thus Ethereum came up with Ethereum2.0 where Proof of Stake mechanism is expected to dramatically and fundamentally increase the capacity of the Ethereum network while increasing decentralisation and preserving network security.

2. Sharding:-

Sharding can be considered a partitioning technique, which distributes the computational and storage across a Peer-toPeer(P2P) network so that each node is not tasked with huge responsibility and can better focus on the single partition allotted to it. Each node only keeps data about its division or shard. 

But this does not mean that one shard is not connected to another. They are well connected to keep the ledger safe and decentralised because every node can view every ledger entry. In the blockchain context, this is simply the chopping of enormous data to better scale. Each shard has its own data, distinguishing it from other shards and making it unique.

Layer 2 Scaling Solutions

Well, now, after discussing the Layer 1 scaling solutions and discussing their implementation limitations, let’s turn our attention to the Layer2 scaling solutions, well we believe many of you must be using the layer 2 solutions already for your transactions; it’s not possible that you haven’t heard of Polygon, it is by far one of the best layer 2 protocol that made it big in the blockchain industry.

Let’s discuss how Layer 2 works. So to put it simply what layer 2 does is it collects all the transactions in a batch and then pushes this batch on the Ethereum blockchain that is to layer 2, okay but how it helps us? What we are doing is like the rabbit did. Instead of taking every crop Strad like the tortoise, we first make our hand full of crop strands and then put it all in the basket. That’s exactly what layer 2 does. It collects all the transactions in a block and then puts it on the ethereum blockchain, so this is how layer 2 protocols enjoy the security and safety of layer 1 chains like ethereum and also at the advantage of better speed and very low transaction fees.

The mechanism discussed above of collecting the transactions and then pushing them to the layer1 is called “roll-up”, and there are majorly two types of roll-ups:-

1. Optimistic rollup:-

This is the roll-up mechanism which assumes the roll-up to be valid; there is no check in place to confirm the authenticity of the roll-up, but there is a verification system where this added roll-up is checked and verified against faults.

Optimistic roll-up is like being optimistic about a change being in your favour. We already believe the added roll-up to be valid, and we confirm its validity. If we cannot confirm this, we discard the roll, and the penalty is imposed.

2. Zero-knowledge roll-up:-

The second type of roll-up is called zero knowledge roll-up or zk roll-up. This varies from optimistic roll-up in terms of confirmation or verification mechanism. In the zk roll-ups, we make use of complex cryptography.

In zk roll-ups, we use something called zero-knowledge proof, which governs the validity of the roll-up using minimal information about the transaction, which is all powered by cryptography. So zk roll-ups are privacy-preserving, sleek and most importantly, fast and cheap.

Conclusion

So, this blog was your guide to layer 1 and layer 2 of the blockchain ecosystem. Here, we started from the basics and built a concept around what layer 1 and layer 2 are, its uses, what scaling is, different mechanisms under both to improve efficiency and many more things.

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• Source: https://blog.quillhash.com/2023/03/29/navigating-the-layers-of-blockchain-layer-1-vs-layer-2-explained/