Cryptocurrencies are built on blockchain networks. Much like a house is built starting with a solid foundation, a crypto network begins with its layer-1 blockchain. This is the bedrock of the entire system, handling processes like security, transaction processing, and much more.
This article will explain exactly what we mean by layer-1 in terms of cryptocurrency and blockchain technology, from the definition of L1 blockchain to real-world use cases and examples.
What is blockchain?
A blockchain network is a network of computers called nodes which work together to process information. This information is processed one block at a time, and each block is added to a permanent ledger that cannot be edited unless a majority of nodes agree to make a change.
As such, blockchain networks with many nodes can become very secure and difficult to censor or attack. This security and the immutable, unchangeable nature of the network information forms the basis for cryptocurrency networks like Bitcoin.
What is layer-1 blockchain?
A layer-1 blockchain in crypto is a network where transactions are executed and confirmed directly on the blockchain.
While layer-2 blockchains exist to augment and take pressure off of layer-1 blockchains, a layer-1 blockchain network is the main network required for a cryptocurrency to function.
Fr example, Bitcoin and Ethereum are layer-1 blockchains and do not need any other blockchain network in order to carry out their operations, such as confirming transactions and minting or creating new units of currency.
Decentralization in L1 blockchains
In cryptocurrency, layer-1 blockchains are often designed to be decentralized, meaning no one authority is controlling the nodes that process the transactions and run the network.
Entities called miners process transactions in exchange for crypto rewards, and while smaller L1 chains are often centralized, networks like Bitcoin and Ethereum are controlled by competing mining pools that ensure that no central figure is making all the decisions.
This relative decentralization is a major factor in the popularity of layer-1 blockchains, and of cryptocurrency in general.
Their independence allows them to create and improvise their native security protocols and governance hierarchies, which in turn make them more reliable than other types of blockchain layers like Layer-2, Layer-3, and so on. But what key features make layer-1 blockchains so reliable and robust? Let’s find out below.
Key characteristics of layer-1 blockchain
Layer-1 blockchains offer several features all of which serve a singular purpose in the end, which is to enhance the functionality and autonomy of the entire blockchain ecosystem. Here are some of the most important features:
1. Freedom
Independence is what makes layer-1 an easy sell for an upcoming cryptocurrency project to build its platform on layer-1 only. By simply creating their governance and security protocols, layer-1 blockchains ensure that their core functions don’t rely on other blockchain layers, which directly ensures a high level of security and decentralization.
2. Native cryptocurrency
Whether it’s staking, governance, or transaction fees, users of layer-1 protocols are not required to buy any other token to do these tasks, rather only the native cryptocurrency is used. This entire process ensures transparency and trust, which adds to the growth of the layer-1 blockchain network.
3. Consensus mechanisms
With a custom-made consensus algorithm, every layer-1 blockchain ensures network integrity and validates transactions with the highest amount of security protocols. Two major examples of such mechanisms include Bitcoin which uses Proof-of-Work (PoW) and Ethereum which employs Proof of Stake (PoS). With its army of nodes following the consensus algorithm, the entire transaction process becomes transparent and secure.
4. Community-driven governance
Stakeholders play a key part in driving the ecosystem growth in layer-1 blockchains. This means taking part in voting processes that determine key decisions that impact the future of the project directly. Overall this process harmonizes a sense of ownership and promotes decentralization which plays a key role in encouraging new cryptocurrency projects to build in this space.
Other features include scalability, smart contract functionality, and potential for ongoing development.
List of layer-1 blockchains
There are at least 130 layer-1 blockchains that offer security, and autonomy, along with other key features mentioned above. Here, we will discuss the top three layer-1 blockchains.
1. Bitcoin (BTC)
Launched in 2009 by an anonymous founder known as Satoshi Nakamoto, Bitcoin is the father of cryptocurrencies and operates on the Proof-Of-Work (PoW) mechanism. As a layer-1 protocol, Bitcoin provides autonomy by offering robust security features, enabling peer-to-peer transactions without the need for a 3rd party, all of which make it the most trustable blockchain network and currency in the web3 world.
2. Ethereum (ETH)
Ethereum was the first blockchain that introduced the world of smart contracts in the blockchain space. It opened new gateways of development in the blockchain world, as it became easier for web3 developers to build decentralized applications (dApps) on the Ethereum blockchain. Ethereum also launched the Proof-of-Stake (PoS) model which further enhanced scalability while at the same time reducing energy consumption by a wide margin.
3. Binance Smart Chain (BSC)
Binance Smart Chain serves two key features, one is to maintain low transaction costs and the other is to be at high performance at all times. This layer-1 blockchain has positioned itself in the world of DeFi as well due to its user-friendly operating system and fast transaction speeds, which makes it ideal for the average user as well as new development projects that want to build on this layer-1 blockchain.
The future of layer-1 blockchains
There’s no doubt that layer-1 blockchains play a critical role in the world of decentralized technologies. From running decentralized apps, and executing transactions on stand-alone blockchain infrastructure, to smart contracts, layer-1 blockchains act as a foundational platform in the blockchain world. However, we can’t deny the fact that these networks still face challenges, especially when transaction volumes and/or user adoption increases with time.
To overcome these challenges many of these layer-1 blockchains have started experimenting and doing research on improving their architectural designs and consensus algorithms.
For example, some blockchains have added mechanisms of Proof-of-Stake (POS) and sharding, to lower transaction fees, and reduce latency, however, despite these critical innovations layer-1 blockchains such as Bitcoin and Ethereum are still moving towards layer-2 blockchains which offer a wider range of solutions to the challenges poised in the blockchain world.
In the future, we can expect more evolution from layer-1 protocols as they adapt to new ecosystems, become more interoperable, and become a combination of intrinsic improvements, thanks to layer-2 and layer-3 blockchain technologies.
