Layer 1 Blockchains: What Are They?

What Are Layer 1 Blockchains?

Layer 1 (L1) blockchains are decentralized software protocols that serve as the foundation for many cryptocurrencies. They act as both the rule-makers and enforcers for crypto projects. The code underlying an L1 protocol defines the standards that computers (nodes) in a cryptocurrency network must follow to securely transmit, validate, and record new transactions on a public ledger. L1 coding specifications provide all operating instructions for the cryptocurrency.

How Do Layer 1 Blockchains Work in Crypto?

Each cryptocurrency has its own unique coding standards and protocols to run its network, but all L1 blockchains require a consensus mechanism to establish trust among decentralized node operators. These consensus mechanisms use algorithms to define and enforce the rules for proper crypto payment processing.

For example, the Bitcoin blockchain uses a proof-of-work (PoW) consensus model, where computers compete to solve complex mathematical problems every 10 minutes to record new BTC transactions on the ledger. In contrast, L1 blockchains like Ethereum (ETH) and Solana (SOL) use a proof-of-stake (PoS) consensus mechanism, which requires nodes to lock up cryptocurrency for the chance to validate transactions.

Examples of Layer 1 Blockchains

Bitcoin introduced the first successful L1 blockchain structure in 2009, and hundreds of subsequent cryptocurrencies have launched their own L1 chains following BTC’s lead. Today, many of the most widely used cryptocurrencies rely on L1 blockchains to secure their networks.

Some of the most prominent examples include:

• Bitcoin
• Ethereum
• Litecoin
• Solana
• Cardano

What Are Some Limitations of Layer 1 Protocols?

While L1 blockchains are critical for secure and efficient crypto transaction processing, they often lack flexibility. L1 blockchain algorithms are intentionally deterministic to ensure every participant in the decentralized network follows the same rules. Although this rigidity helps guarantee predictability and security, it can hinder innovation and scaling efforts.

Layer 1 vs. Layer 2 Protocols: The Key Difference Between Blockchain Layers

L2 refers to any crypto project that leverages the security of an L1 blockchain. L2 solutions frequently build on the decentralization of established L1s like Ethereum to introduce new use cases or boost the scalability of the underlying protocol. For example, L2 networks such as Arbitrum, Optimism, and Polygon operate atop the Ethereum blockchain to deliver higher transaction speeds and lower average fees for users.

Conclusion

Understanding core cryptocurrency concepts like L1 and L2 can be challenging, especially for traders new to Web3. Layer 1 blockchains form the backbone of many crypto projects, ensuring transaction security and efficiency. However, they come with limitations, including a lack of flexibility and scalability challenges. Layer 2 solutions were developed to address these issues, providing enhanced features and improved performance on top of foundational Layer 1 blockchains. Mastering these concepts is essential for effective participation in a crypto ecosystem that continues to evolve into 2025 and beyond.

FAQ

What is Layer 1?

Layer 1 is the base level of a blockchain network, providing core infrastructure and protocols for transaction processing and data storage. Examples include Bitcoin, Ethereum, and Solana.

What are Layer 1, Layer 2, and Layer 3?

Layer 1 is the base blockchain; Layer 2 consists of scaling solutions; Layer 3 refers to applications built on top of these layers.

What is the difference between Layer 1 and Layer 2?

Layer 1 is the main blockchain network responsible for consensus and transactions. Layer 2 is an additional layer built atop Layer 1 to enhance scalability and reduce costs.

Is Bitcoin a Layer 1?

Yes, Bitcoin is a Layer 1 blockchain. It serves as the foundational layer, handling transaction validation and consensus. Bitcoin operates without a separate Layer 2.