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  • Julie McKenna

Understanding Layer 1s and Layer 2s

Layer 1s and Layer 2s are unavoidable topics in blockchain discussions, and we're even starting to see Layer 3s and beyond. Today, we'll dive into Layer 1s and Layer 2s to understand what they are and why they matter.

What is Layer 1 (L1)?

Layer 1 refers to the base layer of a blockchain. It's the original blockchain network where all transactions are recorded and validated. Examples of Layer 1 blockchains include Bitcoin, Ethereum, and Avalanche.

Key Points About Layer 1s:

  • The Main Network: L1 is the core blockchain where transactions are directly processed. It acts as the primary structure for other applications and protocols to build upon.

  • Security and Consensus: It uses consensus algorithms to ensure transactions are secure and agreed upon by all participants.

  • Native Cryptocurrencies: Each L1 blockchain has its own main cryptocurrency, like Bitcoin (BTC) for Bitcoin and Ether (ETH) for Ethereum (Hedera).

  • Scalability Issues: As more people use the network, it can become slow and expensive to process transactions due to the increased demand for processing power and limited transaction capacity (Investopedia).

What is Layer 2 (L2)?

Layer 2 solutions are built on top of Layer 1 blockchains to help them handle more transactions and reduce costs. L2 solutions process transactions off the main blockchain and then send the results back to it. Examples of Layer 2 blockchains include Ploygon, Arbitrum & Base.

Key Points About Layer 2s:

  • Off-Chain Processing: L2 handles transactions outside the main blockchain. This is intended to reduce the burden on the L1 network.

  • Scalability: By processing transactions off-chain, L2 solutions can handle more transactions per second. This improves the transaction throughput of the entire blockchain system (Investopedia).

  • Lower Fees: Because they reduce the load on the main blockchain, transactions on L2 are usually cheaper. This is particularly beneficial in networks where transaction fees can be highly variable, like Ethereum (Hedera).

While Layer 2 solutions offer enhanced scalability and reduced costs, they face criticisms primarily around security and data management. Moving transactions off the main Layer 1 blockchain to an L2 network introduces additional complexity and potential vulnerabilities. 

Avalanche Subnets: An Independent L1 Scaling Solution

Avalanche subnets provide a unique approach within the Layer 1 framework designed to enhance scalability while remaining an integral part of the broader Avalanche ecosystem. Unlike Layer 2 solutions, Avalanche subnets are their own independent Layer 1 blockchains, solving scalability issues without the security and data management problems associated with L2s.

Key Points About Avalanche Subnets:

  • Independent Blockchains: Each subnet is its own independent L1 blockchain, with full autonomy over its operations. They are not just extensions of the Avalanche network but are sovereign chains with their own set of validators and consensus mechanisms.

  • Customizability: Subnets offer full customization, including tokenomics, gas fees, validator requirements, and virtual machines, making them ideal for unique dApps.

  • Enhanced Scalability: Offloading tasks to subnets reduces congestion and improves transaction throughput on the main Avalanche chain.

  • Integration with Avalanche Ecosystem: Although they are independent, subnets benefit from the security and infrastructure of the Avalanche network. This integration ensures that they are secure and robust while still allowing for scalability improvements (Zeeve).

The evolution of blockchain technology hinges on scalability and security. Layer 1 blockchains like Bitcoin and Ethereum provide the foundational infrastructure but struggle with scalability. Layer 2 solutions improve scalability and reduce costs by processing transactions off-chain, yet they introduce complexities and vulnerabilities. Avalanche subnets, functioning as independent Layer 1 blockchains, offer full customizability and scalability while leveraging Avalanche's security. This innovative approach addresses the limitations of traditional L1 and L2 solutions, paving the way for a more flexible and efficient blockchain infrastructure, crucial for the future of decentralized applications.



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