What Are Blockchain Layers? Layer 0, Layer 1, and Layer 2 Explained

If you're new to crypto, you might feel a little dizzy when you start learning about blockchain and run into concepts like Layer 0, Layer 1, and Layer 2. But don't worry, you've come to the right place! In this post, we'll explain "layers" in a really simple way.

What Is a Layer?

You can think of a layer as one of the levels that make up a blockchain. From basic infrastructure to data processing, transaction verification, and performance improvements, each level is responsible for a different role.

• Layer 0: The infrastructure and foundation of the blockchain
• Layer 1: The main blockchain, where transactions are actually processed
• Layer 2: Performance optimization, solutions that increase speed and reduce costs

Simply put, Layer 0 is like the roads and underlying infrastructure that connect blockchain networks. Layer 0 links different blockchains so they can exchange data with each other, and it provides the fundamental foundation of the network.

Layer 1 can be compared to a building. As the core network of a blockchain, Layer 1 processes transactions and executes smart contracts. Blockchains like Bitcoin and Ethereum are Layer 1s.

Layer 2 can be seen as the internal facilities, like an elevator. It's technology designed to boost the performance of Layer 1 (the building), speeding up transaction processing and lowering costs. Just as an elevator maximizes how efficiently people move around a building, Layer 2 greatly improves a blockchain's scalability and efficiency.

Layer 0: A Strong Foundation Comes First

As we saw above, Layer 0 is the foundation of the blockchain. For a blockchain to work properly, its infrastructure, such as data transmission and node connections, has to be solid. Layer 0 also connects various blockchains and enables them to communicate. Well-known Layer 0 projects include Polkadot, Cosmos, Avalanche, and LayerZero.

Layer 1: The Core of the Blockchain

Layer 1 refers to the main blockchains we commonly know, such as Bitcoin and Ethereum. On Layer 1, transactions are processed, blocks are created, and smart contracts are executed.

Layer 1s use consensus algorithms such as proof of work or proof of stake, and based on these, they create and verify blocks and secure the network. Well-known Layer 1 coins include Bitcoin, Ethereum, Solana, Aptos, and Sui.

However, not every Layer 1 is built on a Layer 0. For example, Ethereum is a Layer 1, but at the same time it also has Layer 0 technology. In this way, each blockchain can share characteristics of other layers as well.

Layer 2: Cheaper and Faster

Layer 2 is technology that addresses the limitations of Layer 1. For example, Ethereum Layer 2 solutions emerged to solve problems like the Ethereum network being "expensive and slow."

The key to Layer 2 is improving performance without touching the structure of Layer 1. The core technologies behind well-known Layer 2 solutions are as follows.

1. Rollup: Bundles multiple transactions together and records them on the main chain all at once.
2. Sidechain: Processes transactions on a separate chain and passes only the results to the main chain.
3. State Channel: Processes transactions off-chain to increase speed.

So what Layer 2 projects are out there? The best known include Polygon, Arbitrum, Optimism, and Starknet. These Layer 2 solutions make it possible to process transactions faster and more cheaply than on Layer 1.

What's Next for Layer Technology?

Blockchain has one big challenge to solve: achieving scalability, security, and decentralization all at the same time. This is called the "blockchain trilemma." The dilemma is that increasing scalability weakens security and decentralization, while strengthening security reduces scalability.

Layer 0, 1, and 2 are the results of efforts to solve this problem, and they are still competing and evolving to find the best answer.

Wrapping Up

That covers Layer 0, Layer 1, and Layer 2. Did it make sense? Here's a quick summary.

Layer 0 is the foundation of the blockchain, responsible for connectivity and interoperability. Layer 1 is an individual blockchain that handles smart contracts, transaction blocks, and more. Layer 2 is a scalability solution that makes Layer 1 faster and cheaper to use.

Now you can confidently answer the question "What's a layer?", right? By the way, there's also a Layer 3. Are you starting to get a sense of what that might be? If we get the chance, we'll introduce Layer 3 next time. Thank you!