Layer 1, or L1, is the term that’s used to describe a primary blockchain, such as the Bitcoin Blockchain. Layer 2, or L2, refers to a blockchain network that lies on top of the L1 blockchain. Consider Bitcoin and Lightning Network. Bitcoin is the layer 1 blockchain network, while the lightning network is layer 2. Below are some core differences between layer 1s and layer 2s.

L1 (Layer 1) Blockchain:

  • The base layer of the blockchain, also known as the main chain
  • Operates independently, with its own consensus mechanism, protocol, and token
  • Responsible for securing the network, validating transactions, and maintaining the blockchain’s integrity
  • Typically, the most well-known blockchains, such as Bitcoin and Ethereum, are L1 blockchains
  • Can be slow and expensive due to high transaction fees and limited scalability

L2 (Layer 2) Blockchain:

  • An overlay network built on top of an L1 blockchain
  • Designed to improve scalability, speed, and efficiency by processing transactions off-chain and then settling them on the L1 blockchain
  • Can be thought of as a “second floor” or “second layer” of the blockchain, hence the name
  • L2 blockchains can be sidechains, state channels, or rollups, each with its own unique characteristics and use cases

Key differences:

  • Scalability: L2 blockchains are designed to be more scalable than L1 blockchains, with the ability to process a much higher volume of transactions per second.
  • Security: L2 blockchains inherit the security of the underlying L1 blockchain, but may also have their own additional security measures.
  • Consensus mechanism: L2 blockchains often use a different consensus mechanism than the L1 blockchain, such as proof-of-stake (PoS) or delegated proof-of-stake (DPoS).
  • Token economics: L2 blockchains often have their own token economy, with tokens used for transaction fees, staking, and other purposes.
  • Interoperability: L2 blockchains can facilitate interoperability between different blockchain networks, allowing for the transfer of assets and data between them.

Examples of L1 and L2 blockchains

  • Popular L1 blockchains include Bitcoin (BTC), Ethereum (ETH), Solana (SOL), The Open Network (TOM)
  • Popular L2 blockchains include Polygon (MATIC), Optimism (OP), and Base.