Blockchain layers.

Quick take: IN SUMMARY: Why does a blockchain infrastructure need layers?What are Layer 0, Layer 1 (or simply “L1″), Layer 2 and Layer 3?

Why does a blockchain infrastructure need layers?

A blockchain architecture is made up of several layers, called Layer 0, Layer 1, Layer 2 and Layer 3. There are other classifications that also include Tier 4 and Tier 5, which we will not cover here as the purpose of this article is to provide more of an overview understandable to anyone.

If you’re already more familiar with blockchain technology, you’ve probably heard of them or their terms at some point. But what do layers 0, 1, 2 or 3 do? Why does a blockchain infrastructure need layers?

When thinking not because blockchains would need multiple layers, we can consider the Internet as an excellent example.

The Internet is designedly divided into layers, with different functionalities divided into separate layers, which stack on top of each other. This allows only specific parts to be worked on, without the need to touch other bases.

Due to the distinction between protocols per layer, this allows for scaling, interoperability, and multiple use cases, all within a single infrastructure.

Now, these same ideas can be applied to different layers of a blockchain architecture. Although the blockchain technology stack may have a different number of layers with different functions, its goal of having a layered architecture is very similar to that of the Internet.

Well, in the blockchain, these layers are called Layer 0 (L0), Layer 1 (L1), Layer 2 (L2) and Layer 3 (L3).

Layer 0

It’s the base layer. It consists of the hardware, the Internet, and the connections that allow Layer 1 blockchains to run smoothly and efficiently. Also in this layer are the protocols from which entire blockchains can be built, allowing interoperability between these networks.

A very popular protocol at this layer 0 is Cosmos, which provides open source tools that allow blockchains created with this protocol to be interoperable and communicate with each other, while still allowing projects to meet their own blockchain needs. Therefore, gas costs can be reduced without affecting throughput too much. Another example of a layer-0 blockchain is Polkadot.

Layer 1 (or simply “L1″)

It is the blockchain itself and the layer responsible for security. This layer 1 ensures that blockchain network protocols are followed and implemented. It runs consensus mechanisms, programming languages, and other technical processes to finalize transactions on the network. In short, Layer 1 is generally concerned with creating and adding new blocks to the network.

The widely known Bitcoin and Ethereum are examples of L1 blockchains. The Bitcoin blockchain uses proof of work (PoW) as its consensus protocol as it offers greater security by requiring miners to decode complex algorithms. However, PoW is resource intensive and the difficulty of decoding makes it slow. Therefore, the Ethereum blockchain recently migrated from PoW to proof of stake (PoS), with the aim of becoming a faster — albeit less secure* network.

Layer 2

Layer 2 focuses on scalability and is where applications run. It acts as a third-party integration that primarily handles all transaction authentications, being built on top of the L1 and continuously communicating with it. This allows more nodes to be added to the network, which increases throughput without clogging L1 too much.

Polygon is an example of a layer 2 network created to help scale the Ethereum blockchain. It runs alongside Ethereum, grouping multiple transactions into one and posting them back to L1. This allows for faster transactions, which ultimately reduces gas fees.

Layer 3

Layer 3 is the user interface that communicates with the blockchain and end users.

Applications built on this layer enable real-world uses of blockchain, such as gaming, decentralized finance (DeFi), and storage. Many of these applications also have cross-chain capabilities, which allows users of multiple blockchains to utilize them.

An example of a Layer 3 blockchain is Uniswap, which is an automated and decentralized crypto exchange (also known as DEx) based on Ethereum.

A decentralized application (DApp) allows its users to trade their crypto assets at lower fees compared to centralized order book exchanges such as Binance and Coinbase.

It also does not require users to provide their private keys, which makes trading more secure.

As people begin to widely use blockchain architectures and cryptoassets, it becomes more necessary to improve their development.

Therefore, many companies and individuals have been constantly working to make layers more secure, scalable and decentralized.

After all, the future is a process, not a destination.