Blockchain Layer 1 vs Layer 2: What’s the Difference?

If you’re already familiar with blockchain, you’ve likely come across the terms Layer 1 and Layer 2. But what’s the difference between Layer 1 vs Layer 2?

Essentially, blockchain scalability is the ability of a blockchain network to support an increase in both transaction volumes and number of nodes. Both are important, but one has more advantages than the other. Below, we’ll briefly discuss the importance of layer 1 and layer 2 scalability.

Layer 1 vs Layer 2

Blockchain scalability is a fundamental concern for all cryptocurrencies, so understanding the difference between the two is important. The first, or Layer 1, refers to the main structure of a blockchain network, like Bitcoin. On the flip side, Layer 2 refers to networks built on top of other blockchains, such as Ethereum. 

In other words, Layer 1 solutions change the rules of the original blockchain directly, while Layer 2 solutions rely on a parallel network to facilitate transactions off the mainchain. A good example of a parallel network operating as Layer 2 would be Polygon, which operates on the Ethereum blockchain.

Blockchain technology and the scalability of Ethereum are a prime example of how this concept will make blockchains more efficient and help drive widespread adoption. This article will look at some Layer 2 solutions already being implemented in the blockchain space. Read on to learn more about blockchain scaling technology.

Sidechains

As a solution to the difficulty of scaling, sidechains are used to solve this problem. As an alternative to the Ethereum mainnet, sidechains can be used in a decentralized way with a single network, but this solution is often more centralized than other layer 2 solutions. 

This is because sidechains use their own consensus algorithms, validator nodes, and miners. Despite the fact that they offer faster service, sidechains are usually not free from fees, such as when transferring assets. Moreover, the presence of a federation can make some users uncomfortable or uneasy, because it makes them worry that they cannot transfer their assets back to the mainchain.

Sidechains between Layer 1 and Layer 2 are an effective solution for the scalability problem. These blockchains are connected to each other through state channels, which provide two-way communication. The transactions on the side chains do not affect the mainchain and are not private, but they are still secure. In addition, sidechains are also used for the scalability problem, since they enable multiple transactions off-chain while bringing them back to the permanent record.

Sharding

A discussion about sharding can be useful for blockchains, and it’s not just a theoretical debate. Sharding is also a great way to improve the native security and scalability of a blockchain. In fact, the creator of Ethereum wrote about sharding in a blog post in 2018. 

As a basic example, sharding allows a blockchain to increase its transaction throughput by dividing a transaction set into multiple smaller ones. Essentially, sharding means dividing a transaction set into many smaller ones, each storing different bits of data and allowing for faster processing.

The biggest advantage of sharding is that it decreases the amount of transaction fees while retaining decentralization. In a layer 1 network, every transaction must be verified by several nodes, reducing the possibility of attack. By contrast, sharding at the layer 2 level relies on a secondary network. This means that sharding solutions are generally more expensive than Layer 1 solutions, but they do offer a lower transaction fee.

Network segmentation

Network segmentation is an important security best practice, and a critical component of any effective network architecture. The key is to segment your network into logical resource groupings. These groups should be separate enough to keep your system secure while also avoiding bleed points. The following are some of the benefits of network segmentation. Also, keep in mind that network segmentation is not applied without a thorough analysis of the network’s current architecture.

Using segmentation will prevent malicious traffic from accessing the entire ecosystem, allowing  security teams to quickly identify and mitigate a hacks or attacks. According to IBM, the average cost of a data breach has increased from $3.86 million USD in 2012 to $4.24 million USD in 2016 – the highest total cost in 17 years. With rising costs, security has become a top priority all blockchains, and network segmentation is an integral part of effective network security.

Scalability 

Why is scalability important? In simple terms, scalability is how well a network scales while maintaining its essential characteristics, like security. Here are the benefits of scalability:

Scalability determines the network’s capacity

In the world of networking, scalability is the ability to handle increases in workloads. Network scalability can be accomplished in a few ways: expanding bandwidth capacity and supporting physical expansion to new development areas. This makes network scalability an important part of future-proofing cities. Listed below are the benefits of scalability. For more information, contact your local MNSP.

Scalability is the ability of a system or application to accommodate increased workloads and scope. Scalable systems maintain performance and efficiency when their capacities increase. This concept is critical to the corporate environment and financial markets, where companies must have the ability to cope with increased demands while maintaining profit margins. 

Scalable companies are more likely to be profitable, and can quickly ramp up production to increase volume and meet market demands. To understand how scalability impacts blockchain networks, knowing the factors that determine its scalability is key.

First, consider how much traffic a system can handle. 

A scalable network can handle a large number of requests and increase the amount of transactions it can process. In the case of a peer-to-peer network, scalability is important, as new peers can increase demand on each peer as the network grows. 

It reduces propagation delays

One of the major problems with blockchain is the low Transaction Processing Speed and high broadcast delay. To address these issues, GVScheme introduces the guarantor role based on a trust value mechanism. In this role, a node is trusted and guarantees the spread of a block across the network. Consequently, nodes determine the order in which to send a verification block and a propagation block. By doing so, the block propagation delay is reduced.

Various academic papers have been published on block propagation time. These papers update previous data and discuss the benefits of improving the time. There are sites where one can monitor propagation stats. Thes  provide historical data and charts that show the current state of the network. The main goal is to reduce block propagation delays as much as possible. The time to validate a block is the bottleneck of block propagation, but it can be reduced by not validating all blocks. However, selective block validation does not solve the problem of missing transactions.

It enhances the network’s essential characteristics

To ensure that networks are built to support large amounts of data, scalability is essential. Instacart, for example, runs tens of thousands of API requests per second. In order to avoid latency and keep customers happy, the company is working to anticipate future demand. 

The result is a high-performing network that supports high data volume and maintains the quality of the user experience. To ensure that scalability remains a key component of network design, companies must build their architectures with the goal of scaling to the demands of the company.

A scalable architecture maintains performance levels as additional processors are added. While this can make the network more expensive, it does improve overall system availability. The scalability of a network can be improved by increasing its number of servers. The problem is that a high-end web application written for a single server may not scale well when it is run on a low-bandwidth network.

Scalability improves security

Blockchain scalability refers to the network’s capacity to support higher transaction throughput as its users increase. As blockchain adoption continues to grow, this feature is essential to continue its success. A perfectly scalable blockchain can accommodate the growing use cases without sacrificing its security or decentralization. However, many decentralized networks face problems with scalability. Here are some ways to improve your blockchain’s scalability.

Final thoughts

As the cryptocurrency industry expands, it appears that the future of blockchain will indeed be multi-chain. A multi-chain future for blockchain means multiple ecosystems thriving while being interoperable with each other.

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