Layer 1 in blockchain technology
Layer 1, also known as the implementation layer, builds on what Layer 0 provides and contains the core functions of the API for the blockchain network. It is responsible for storing the actual data on the blockchain and plays a vital role in ensuring the accuracy and tamper-proof of blockchain information.
At layer 1, the data is organized into blocks, which are collections of transactions that are verified and confirmed by the network nodes. These blocks join the blockchain in a linear, chronological order, forming the immutable ledger at the heart of blockchain technology.
Well-known APIs for blockchain networks such as Bitcoin, Ethereum, Cardano, and Ripple operate at Layer 1, utilizing their respective protocols to store and secure the blockchain's data. However, scalability has always been a challenge for Layer 1 blockchains, as any changes or issues in the underlying Layer 0 protocol can affect its performance.
Traditionally, Layer 1 blockchain systems that rely on proof-of-work (PoW) consensus mechanisms, such as Bitcoin and the pre-merger Ethereum network, have faced scalability issues as the network has grown. The increasing number of participants requires higher computing power, resulting in increased transaction fees (gas fees) and longer processing times.
To address these scalability challenges, Layer 1 API for blockchains is evolving toward proof-of-stake (PoS) systems that have significantly lower energy requirements. In addition, sharding is a technique adopted by some PoS systems to help improve scalability by dividing the compute load.
The second layer of blockchain technology
Layer 2 protocols, also known as scaling solutions, run on top of Layer 1 and provide mechanisms to achieve higher transaction throughput and lower costs. These solutions enable certain transactions to take place off-chain, reducing the burden on the Layer 1 ecosystem and allowing cheaper and faster transactions.
A notable example of a Layer 2 solution is the Lightning Network, which is implemented on top of the Bitcoin API for blockchain. The Lightning network facilitates fast and cost-effective micropayments by enabling the execution of off-chain transactions while leveraging the security of the underlying Layer 1 blockchain.
Sidechains are another type of Layer 2 solution that enhances scalability and functionality. One example is Ronin Network, which is used by the popular NFT game Axie Infinity. Ronin operates as a sidechain of the Ethereum network, providing a separate environment for conducting gaming-related transactions. This approach could help mitigate the high gas expenses associated with the Ethereum PoW system ahead of the 2022 merger.
Layer 2 solutions play a vital role in extending the capabilities of Layer 1 blockchains, making them more scalable, efficient, and cost-effective, while still leveraging the security and decentralization provided by the underlying Layer 1 infrastructure. As an implementation layer, Layer 1 builds on top of Layer 0 and maintains the core functions of the blockchain network. Examples of Layer 1 blockchains include Bitcoin, Ethereum, Cardano, and Ripple. However, scalability remains a challenge at this layer, as any changes or issues in the underlying 0 protocol can affect Layer 1.
The third layer in API for blockchain technology
Layer 3, the application layer, hosts decentralized applications (dApps) and various protocols that support different applications in the blockchain ecosystem. This layer is essential for achieving true interoperability and supporting the development of practical use cases for blockchain technology.
In Layer 3, some sub-layers help facilitate the effective separation and organization of blockchain protocols. One of these segments includes application and execution sub-layers that work together to enable blockchain applications to run smoothly.
Layer 3 plays a key role in providing a user interface (UI) that allows humans to interact with the API for blockchain. These UIs enable seamless communication and interaction with a variety of decentralized applications, including those in the emerging decentralized finance (DeFi) space. Examples of Tier 3 applications include decentralized exchanges, liquidity supply platforms, pledge applications, and wallet providers.
Decentralized cryptocurrency exchanges like Uniswap and PancakeSwap are examples of Layer 3 interfaces that enable users to exchange cryptocurrencies on a peer-to-peer basis. Wallet providers such as Binance and Coinbase also operate on this layer, offering users secure storage and management of digital assets.