“Blockchain technology has grown at a rapid pace in the last decade and the present institutional adoption has made it the most talked about innovation today. With the increasing adoption, the blockchain networks are facing the problems of scalability and hence, over the time Layer 0, Layer 1 and Layer 2 solutions are being implemented on the blockchain. Let’s decode these layers.”
Problem of Scalability
With the increase in the number of crypto users and blockchain adopters around the world, one problem has always been a pain point for the crypto industry and that is scalability. As the numbers of transactions on the blockchain networks are increasing, it is leading to slowing down of the blockchain network. To tackle this problem Layer 0, Layer 1 and now Layer 2 solutions are being implemented. To understand them, let’s discuss them in detail.
Layer 0, Layer 1 and Layer 2
There are generally 6 layers in the blockchain architecture including data layer, network layer, consensus layer, activating layer, contract layer and application layer. Each layer has a specific purpose, and are structurally inseparable. For the purpose of scalability, these layers are reclassified into 3 layers namely layer 0, layer 1 and layer 2.
Layer 0 is known as the data transfer layer and is the bottom most layer of blockchain. It is responsible for integration between blockchain and traditional networks. In the layer 0 solution for scalability, changes are only made to the layer 0 of the blockchain. This means that the basic structure of the blockchain is not changed but scaling solutions are implemented by only optimizing layer 0.
The layer 1 constitutes the data layer, network layer, consensus layer and activating layer. Most of the cryptocurrencies today have an independent and unique public chain on which all the transactions are settled. The layer 1 scaling solution or also known as the On-Chain scaling solution is implemented on the base layer of the blockchain architecture. The solution requires the change in the block size, change in consensus mechanism or change in block generation time etc to scale the blockchain. This means that it requires changing the inherent properties of the blockchain. The Layer 1 solution intends to scale the blockchain and at the same time pursue decentralization and security.
Layer 2 constitutes the Application layer as well as Contract layer of the blockchain. The layer 2 scaling solutions are also known as the off-chain scaling solutions as they do not require the changes to the main blockchain but provide scaling ability by using side chains. This will help in reducing the load on the main chain (layer 1) and in increasing the efficiency of the blockchain. The Layer 2 solutions pursue efficiency and performance.
All the blockchain networks such as Ethereum, Bitcoin etc. are striving to embed the Layer 2 solutions on top of the Layer 0 and Layer 1 solutions to ensure that blockchain becomes more scalable, interoperable and efficient at the same time.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investment.
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