Layer 1 Privacy
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"A house A layer-1 network is another name for a base blockchain. BNB Smart Chain (BNB), Ethereum (ETH), Bitcoin (BTC), and Solana are all layer-1 protocols. We refer to them as layer-1 because these are the main networks within their ecosystem. In contrast to layer-1, we have off-chains and other layer-2 solutions that are built on top of the main chains.Bitcoin and Ethereum are great examples of layer 1 blockchain protocols.
A common problem with layer-1 networks is their inability to scale. Bitcoin and other big blockchains have been struggling to process transactions in times of increased demand. Bitcoin uses the Proof of Work (PoW) consensus mechanism, which requires a lot of computational resources.
While PoW ensures decentralization and security, PoW networks also tend to slow down when the volume of transactions is too high. This increases transaction confirmation times and makes fees more expensive.
Blockchain developers have been working on scalability solutions for many years, but there is still a lot of discussion going on regarding the best alternatives. For layer-1 scaling, some options include:
1. Increasing block size, allowing more transactions to be processed in each block.
2. Changing the consensus mechanism used, such as with the upcoming Ethereum 2.0 update.
3. Implementing sharding. A form of database partitioning.
Layer 1 improvements require significant work to implement. In many cases, not all the network users will agree to the change. This can lead to community splits or even a hard fork, as happened with Bitcoin and Bitcoin Cash in 2017.
SegWit
One example of a layer-1 solution for scaling is Bitcoin's SegWit (segregated witness). This increased Bitcoin's throughput by changing the way block data is organized (digital signatures are no longer part of the transaction input). The change freed up more space for transactions per block without affecting the network's security. SegWit was implemented via a backward-compatible soft fork. This means that even the Bitcoin nodes that are not yet updated to include SegWit are still able to process transactions.
What is layer-1 sharding?
Sharding is a popular layer-1 scaling solution used to increase transaction throughput. The technique is a form of database partitioning that can be applied to blockchain distributed ledgers. A network and its nodes are divided into different shards to spread the workload and improve transaction speed. Each shard manages a subset of the whole network's activity, meaning it has its own transactions, nodes, and separate blocks.
With sharding, there is no need for each node to maintain a full copy of the entire blockchain. Instead, each node reports back the work completed to the main chain to share the state of their local data, including addresses’ balance and other key metrics.
Layer 1 vs. Layer 2
When it comes to improvements, not everything is solvable on layer 1. Due to technological constraints, certain changes are difficult or almost impossible to do on the main blockchain network. Ethereum, for example, is upgrading to Proof of Stake (PoS), but this process has taken years to develop.
Some use-cases simply cannot work with layer 1 due to scalability issues. A blockchain game could not realistically use the Bitcoin network due to the lengthy transaction times. However, the game may still want to use layer 1's security and decentralization. The best option is to build on top of the network with a layer-2 solution.
Lightning Network
Layer-2 solutions build on layer 1 and rely on it to finalize its transactions. One famous example is the Lightning Network. The Bitcoin network under heavy traffic can take hours to process transactions. The Lightning Network lets users make speedy payments with their Bitcoin off the main chain, and the final balance is reported back to the main chain later. This essentially bundles everyone's transactions into one final record, saving time and resources.
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