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For those who’ve hung round in crypto circles, you then’ve most likely heard of the time period “layer 2,” which is often used to explain numerous crypto property. However what’s layer 2 crypto, and is there any layer 1 (or 3, or 4…)? What do layers should do with blockchain, anyway? Let’s discover out!
How Does Layer 2 Work?
Blockchains is probably not onions, however they do have layers… Properly, at the least technically. “Layer 2” merely refers to any further frameworks constructed on prime of current blockchains, that are known as layer 1. You’ll be able to consider it as placing race automotive wheels and engine in your trusty outdated Honda.
Designed to unravel basic points that plague most blockchain networks like Bitcoin, layer 2 options steadiness scalability, transaction pace, and throughput with a excessive stage of safety. They do that by processing transactions off-chain after which passing them again to the primary chain for settlement.
Varieties of Layer 2 Frameworks
Layer 2 options are further integrations used along with the unique blockchain, not as an alternative of it. Though these options will not be as well-known to the general public, there are fairly a number of examples of them within the crypto market already. They arrive in several sorts, and listed here are the most typical ones.
Sidechains
Sidechains are precisely what they appear: separate networks that may effectively course of transactions and have full interoperability with their authentic blockchains. They don’t seem to be a layer 2 framework however another scaling answer that always comes up in discussions of the blockchain know-how trilemma difficulty.
Every sidechain can have its personal consensus protocol, block dimension, safety, and so forth. Sidechains function independently from the blockchain they’ll assist and to which they’re linked utilizing a two-way bridge.
Bitcoin blockchain scaling options such because the Liquid Community, primarily utilized by exchanges to facilitate sooner and cheaper BTC transactions, ceaselessly flip to sidechains.
Plasma
Ethereum’s Plasma combines sensible contract know-how and cryptographic verification to allow quick and low cost transactions on layer 1 networks. Such a result’s achieved by offloading transactions to aspect chains generally known as plasma or little one chains. Plasma chains are largely unbiased and solely periodically report back to the primary community in case of disputes or points.
This layer 2 answer kind could be pictured as a tree — that’s as a result of it sometimes has numerous little one chains that every one have their goal and could be constructed on prime of one another.
Plasma just isn’t a extremely popular layer 2 answer kind because it nonetheless has numerous drawbacks, reminiscent of lengthy withdrawal time frames. Nevertheless, it’s at the moment being totally researched, so any and all points might quickly be addressed and resolved.
Validium
Validium is a layer 2 framework in a position to dramatically decrease transaction charges whereas concurrently rising transaction speeds. It’s a zero-knowledge proof answer that processes blockchain transactions off the primary community. These off-chain operations get verified utilizing sensible contracts.
This layer 2 framework kind doesn’t retailer knowledge on its underlying blockchain, which sacrifices some community safety however permits for a lot sooner and cheaper transactions.
State Channels
State channels are, effectively, channels that get connected to the bottom layer — the unique blockchain — and carry out numerous operations that later get reported again to the primary chain. They usually discover purposes as cost channels of their simplified kind.
State channels are extremely efficient, permitting customers to make any variety of transactions whereas solely submitting two situations of transaction knowledge to the underlying chain. Sadly, they are often fairly pricey to arrange and should be periodically checked on.
This framework kind is the layer 2 scaling answer utilized by Bitcoin’s Lightning Community.
Rollup Chains
Rollup chains can roll up a whole lot of transactions right into a single one on the layer 1 community. Ethereum particularly favors this answer as a result of it dramatically reduces charges by splitting them amongst all of the transactions within the rollup. On the identical time, because the execution of transactions really occurs on the layer 1 blockchain, all knowledge concerned stays absolutely safe.
There are two varieties of rollup chains, zero-knowledge and optimistic ones. They differ in how they relay transaction knowledge again to layer 1. ZK rollups, additionally known as zero-knowledge proofs, are sooner than optimistic rollups however much less user-friendly and assume a sure stage of unverifiable belief.
What Is the Distinction between Layer 1 and Layer 2?
As we’ve got already talked about, layer 1 refers back to the blockchains everyone knows and love — Bitcoin, Ethereum, the Binance Sensible Chain — the listing goes on. Any layer 1 answer equals a basic change within the construction of the blockchain itself, a modification. It may very well be a rise in block dimension, an introduction of a brand new consensus mechanism, and extra.
Layer 2 options, then again, function off-chain. They improve the way in which transactions and knowledge are processed and arranged as an alternative of fully overhauling them. Whereas they switch transactions again to the blockchain, it’s essential to notice that a lot of them will not be as safe as the unique layer 1 blockchain.
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Is There a Layer 3?
Trendy blockchain networks don’t cease at layer 2: aside from it, they have an inclination to introduce layer 3. In reality, there may be additionally layer 0: let’s take a quick take a look at it.
Layer 0
Layer 0 is the muse and the premise that enables blockchains to operate as easily as they do. Whereas layer 2 options are constructed upon current networks, layer 0 ones can assist numerous crypto tasks, no matter what they’re like. They’ve a number of features:
- Offering baseline infrastructure
An enormous entry barrier many blockchain builders face is having to code a complete mission from scratch, which is not any straightforward job. Not solely does it require numerous expertise, it is also fairly heavy on sources, most significantly, one’s time. Layer 0 options repair that by offering baseline important infrastructure to all blockchains that use their service.
- Enabling interoperability
One of many large downsides of crypto tasks is that they usually should be on the identical chain as every other mission they need to connect with and work with. Though there are 3–4 primary networks that home nearly all of DeFi tasks, this nonetheless creates points and, in a manner, makes the trade much less decentralized.
Interoperability fixes that: so long as two blockchains tasks are constructed on the identical layer 0, they’ll work together as if they’re housed on the identical chain.
- Facilitating cross-chain exchanges
Cross-chain exchanges are robust to execute and could be extremely time-consuming and cost-ineffective. The charges can rise sky-high. Nevertheless, layer 0 tasks can come to the rescue: not like layer 2 options, they enhance the effectivity of cross-chain interplay as an alternative of the pace and the price of any specific blockchain.
One of the best examples of layer 0 tasks embrace Cardano, Cosmos, and Polkadot. Please observe, nevertheless, that regardless of the way it could appear, layer 0 just isn’t mandatory, and lots of blockchains don’t have it. Nonetheless, it’s very helpful and can undoubtedly play a giant position in the way forward for the crypto trade.
Layer 3
Layer 3 is all of the purposes customers make on prime of blockchains. These enhance the usability facet of networks, making their options much more digestible and user-friendly. Some examples of layer 3 options are Uniswap, numerous gaming tasks like Blockchain Cuties, and so forth.
FAQ
What does layer 2 imply?
Layer 2 is an extra framework/protocol constructed on prime of the present blockchain community to reinforce it.
What’s the operate of layer 2?
Layer 2 protocols often make blockchains extra scalable, permitting them to course of extra transactions per hour at decrease prices and so forth. All in all, their principal operate is to make the present blockchain higher.
Is Bitcoin a layer 2 cryptocurrency?
Bitcoin is a layer 1 cryptocurrency, similar to Ethereum or Solana.
What’s a layer 3 crypto?
Layer 3 refers to blockchain-related purposes like dApps, distributed storage, and video games.
Disclaimer: Please observe that the contents of this text will not be monetary or investing recommendation. The data offered on this article is the creator’s opinion solely and shouldn’t be thought-about as providing buying and selling or investing suggestions. We don’t make any warranties in regards to the completeness, reliability and accuracy of this info. The cryptocurrency market suffers from excessive volatility and occasional arbitrary actions. Any investor, dealer, or common crypto customers ought to analysis a number of viewpoints and be aware of all native rules earlier than committing to an funding.