Knowing blockchain design, you won’t miss out with the use of layer-1 and layer-2 technologies.
For example if you read about Polygon, it is known as a layer-2 solution for Ethereum.
Important to the existence of layer-2 for most of these blockchains?
Layer-1
Layer-1 networks refer to the blockchain, the primary and most basic network.
Example of a layer-1 network:
Bitcoin
Ethereum
Litecoin
Layer-2
A network developed on a blockchain
Example of a layer-2 network:
OmiseGO
Lightning Network
Layer-1 solution
Present as an additional layer to the basic blockchain protocol to increase scalability.
Able to change protocol settings directly to increase transaction capacity and speed.
Enter more users and information.
For example:
The amount of data for each can be increased
Speed up transactions on the block, while dumping network output.
Commonly encountered layer-1 solutions:
Consensus protocol changes
Proof-of-Work (PoW) is very synonymous with layer-1 networks like Bitcoin.
Ethereum also uses PoW and is in the transition phase to Proof-of-Stake (PoS).
Sharding
Refers to the division of transactions in a network into several small data sets known as "shards".
These shards are then processed simultaneously.
Ethereum 2.0, Zilliqa, Tezos, and Qtum are currently studying this functionality.
Layer-2 solution
Present as a network that resolves issues at layer-1. Also known as a layer-2 network.
Improve the scalability and efficiency of a blockchain.
Can think of it as an ‘expansion’ of the network to reduce the transaction burden.
A portion of the transaction is transferred to layer-2 before being processed and reported back to the main network to validate the transaction.
Reduces blockchain congestion, making it more scalable.
For example:
Layer 1 Networks: Bitcoin that still uses PoW.
Layer 2 Solution: Lightning Network.
Commonly encountered layer-1 solutions:
Nested blockchains.
Centralized broadcast (state channel).
Sidechains
However, both have problems that need to be addressed, dubbed the ‘scalability trilemma’. Due to that, Algorand was developed with the aim of resolving this issue through the application of the Pure Proof of Stake (PPoS) consensus mechanism.
Whatever it is in a crypto ecosystem, scalability is crucial to running transactions fast.
