Grassroot Crypto Education | Series 2 Volume 14 - Understanding Layer 1 and Scaling Solutions in Blockchain
Introduction
It's a great pleasure to be back for another lecture in a new week, this is the 14th volume in our series 2 and I trust you have enjoyed numerous crypto knowledge in the space of the inception of this initiative till the moment. That being said, we are looking into a concept in blockchain that would open your sight to what Layer 1 means and some scaling solutions. Let's get started.
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Understanding Layer 1 in Blockchain
It's necessary to understand what layer means, this typically means an object that begins the infrastructure of a protocol, it all starts with one while we can have many other layers built on the first one. In essence, the whole journey began with one, and that lays the foundation for others.
In the blockchain, Layer 1 describes the basic infrastructure of a blockchain network, on which a token was built for the validation and facilitation of transactions, in other words, layer 1 is the original chain of a project. Some of the examples of layer 1 blockchains are Bitcoin, Ethereum, Tron, Steem, Elrond..., all these and a few more others are the Layer 1 of their chains.
Some Layer 1 blockchains are often associated with a few problems. Scalability has been the major problem with Layer 1 blockchains, some of them have low Transaction Per Second (TPS) which results from ever-increasing users on the network with many making transactions at the same time. A case like this leads to the reduced speed of transactions and there is always a need to speed up things to create a convenient space for users on the network.
For instance, the Bitcoin network has 10 minutes of block-producing time with less throughput as compared to most recent blockchains, with increased users on the network, it experiences more pressing scalability issues that necessitate a scaling solution. The result of the scaling solution gives birth to Layer 2 in the blockchain.
Layer 2 in Blockchain
Layer 2 in blockchain is the second layer built on top of the original chain, layer 1. The aim of layer 2 is to address issues like scalability on the network to ensure more throughput without affecting the security of the main chain. Scalability problems are not only handled via layer 2, a network can choose to make changes to improve scalability without considering layer 2.
The Bitcoin blockchain has taken care of scalability on its network by changing data arrangement to avail more space and that was done through the layer 1 scaling solution through SegWit (Segregated) Witness, a soft fork, you remember our lecture on forks, right? Many projects have stuck to layer-2 solutions to avoid any dispute within the network and maintain the main chain, this makes the layer-2 solution an alternative for users on the networks.
Examples of Layer 2 Solutions
The Ethereum blockchain is looking forward to an upgrade of its old chain from Proof of Work (PoW) to Proof of State (PoS) consensus mechanism, to enable the network to be more scalable, while waiting for that, there are a few layer 2 scaling solution for Ethereum. We would discuss one briefly for the Ethereum blockchain, which is Polygon and Lightning network for the Bitcoin network.
Polygon
The Ethereum blockchain is associated with low throughputs and high gas fees due to its consensus mechanism. Polygon is a layer 2 solution that aims to improve the speed of transactions at a low speed on the Ethereum blockchain. The framework of Polygon enables the chain to communicate with the Ethereum blockchain and vice versa, likewise, it's equipped with interoperability with the Ethereum blockchain.
Polygon utilizes two bridges to achieve interoperability and security, Proof of Stake Bridge that utilizes the PoS consensus mechanism for validations, and Plasma Bridge which comes with enhanced security. It's established that the POS Bridge comes with less withdrawal time while the Plasma Bridge has higher withdrawal time, you will get to understand these in the next few points.
- To utilize Polygon for scalable transactions on the Ethereum blockchain, users would send an amount of asset to the Polygon contract on the mainchain.
- Equivalent amount of the token would be minted on Polygon while the token is locked on the mainchain. The user can perform transactions to desired destinations at low fees.
- The withdrawal time on the PoS bridge is faster, say about 3 hours while the withdrawal time on the Plasma bridge can be up to 7 days.
After the transactions, the user can withdraw the balance back to the Ethereum chain while it would be unlocked and the token on Polygon would be burnt after withdrawal.
Lightning Network
Lightning network is the layer 2 scaling solution on the Bitcoin network to enhance faster transactions and at low or no transaction fees, just like the name sounds, we can relate its intention to transact at the speed of light, lol. The lightning network offloads transactions from the mainchain to enable more space for enhanced scalability.
Transactions on the Lightning network are made completely in the absence of miners, which means transactions are only signed between two parties utilizing a certain private key to authorize transactions without paying any miner fee in the process, in essence, the parties involved are the nodes solely responsible for validations of transactions between them and the records are kept off-chain.
- To use the Lightning network, funds are needed to be bound to a channel, this transaction is recorded on-chain while the transactions within the channel are recorded off-chain.
- Joe and Jane can agree to open a channel on the Lightning Network to facilitate transactions with high speed and no transaction fee. Each has to bind funds to the channel and pay for miner fee. Subsequent transactions are made in the absence of miners and they pay no fee.
- They can close the channel when they are done by unbinding the funds, this would be recorded on-chain while they pay for miner fees.
The Lightning network enables users to make fast transactions, at no fees at all and enhanced privacy, so outsiders won't see their transactions within the channel which is quite great.
Benefits of Layer 2 in Blockchain
There are many benefits associated with Layer 2 solutions making a blockchain network better thereby enhancing user experience. Let's see some of these below.
- One of the benefits is improved scalability whereby the mainchain associated with a high volume of transactions is bypassed to make quick transactions.
- Enable users to make transactions at a low fee or no fee at all without affecting the integrity of the mainchain.
- In some cases, it enhances privacy whereby transactions on layer 2 are completely eliminated from the mainchain as such making them untraceable.
Conclusion
In conclusion, Layer 1 is the original chain of a blockchain network, a few problems can necessitate upgrades to improve overall efficiency while in some cases, Layer 2 solution is required, these are protocols built on top of Layer 1 to achieve a high speed of transactions, reduced fee, eliminate congestion on the network and so on.
The blockchain realm is ever-growing, new projects are trooping in and existing projects are looking for ways to make their chain better, an example is the incoming Ethereum 2.0 which is aimed to migrate to PoS consensus mechanism. We would explore the practical sides of this in the nearest future as you grow in the ecosystem. I hope you enjoyed the lecture today and I look forward to seeing your entries.
Homework Task
- What's your understanding of Layer 1 and Layer 2 in Blockchain? Give at least 2 examples of each (Layer 1 and Layer 2).
- Explain at least One (each) Layer 2 for Bitcoin and Ethereum Blockchains. (You can use the ones discussed in the lecture or research others). What are the benefits of Layer 2 in Blockchain?
Guidelines
- Write an article of at least 300 words. Keep your explanation as simple as possible.
- Include the tag #grassroot-educations2v14, #fintech, #steemexclusive, and your club status among the first 4 tags. Also, tag me @fredquantum in your homework entry.
- The participation in this lecture/homework task is open to everybody (anyone can write, I will leave my comments on your entries) but only entries made by verified kids (not participating in the Academy yet) would be accessed with grades.
- I will check your articles and drop comments on the entries submitted now till 11:59 pm UTC, 17/07/2022.
Cc:-
@steemkidss
Another powerful lesson for kids, we really appreciate you our crypto teacher for the excellent way you have presented this lesson.
Looking forward to seeing more of your lessons.
POWER UPs| 1,322.487STEEM
Thanks for the verification, @udyliciouz.
Nice article keep it up