Layer2 and Why are they important

In the blockchain and crypto world, the layers ecosystem is somewhat tricky for builders but essential for a multitude of reasons. Though this is not a new concept, it has evolved over the years. In this article, I’ll walk you through different perspectives to understand what layers are in the blockchain.

Among the web3 communities, the most popular term is “security” and for a good reason. When a chain is valuable means it is more secure. When it is secure, it becomes easy for the next user to store their assets in that chain.

Secure and speed matter in the transactions that are happening around the world. That’s where the layers come in!

Layer 1

In a nutshell, layer 1 tokens exist to protect the chain against 51% of attacks.

Let’s look at this idea:

If we look at any process then we see there’s a base then wrapped up layers over it to protect. Layer 1 is the base layer.

First layer of Bitcoin is basically a protocol that provides base to other layers to make the overall system and ecosystem scalable. Ethereum and Solana are examples of layer 1 protocols and what we build upto that is an integration of third-party with a Layer-1 blockchain architecture. Polygon (Matic chain) is a great example of integration with Layer 1.

“Decentralized” protocols are only as good as their ability to upgrade themselves. In order to scale a blockchain, you have to increase its transaction capacity. Inherently, blockchains with large and more blocks are harder to verify, and therefore, are more susceptible to becoming centralized which shouldn’t be the case in a decentralized ecosystem.

That’s when Layer 2 comes in.

Layer 2

Layer 1 is considered to be slow due to security reasons. Layer 2 on top of it gives us so many advantages and it is important because:

1) It increases speed and efficiency

2) It greatly improves experience of a user by reducing network congestion on Ethereum’s Mainnet

3) It bundles the trasactions into a single one and reduces gas fees (A user’s biggest concern)

There is a takeaway to be drawn from this, if you expect blockchains to scale exhaustively, it’s too easy to overlook their specialized purpose of decentralization.

One final note regarding zkRollups

Rollups are a “hybrid” layer 2 scheme.

“Zero-Knowledge” Rollups promote scalability by combining mass transfer processing into a single transaction; they are one of the options being developed for layer 2 construction. It bundles hundreds of transfers into a single one. Smart contracts decipher that by deconstructing and verifying all the transfers held in one single transaction.

Lucas Vogelsang, Co-founder and CEO of Ethereum-powered DeFi platform Centrifuge observes that “The unique thing about zero-knowledge proofs is that they stay small even when the work that is verified with them grows significantly”

It reduces fees per user transfer, rapid transactions and increases the scalability of layer 2. One of the hottest L2s currently!

Final Thoughts

Given that all of the code in a blockchain network is open-source, the only source of defensibility is by scaling chains.

While there are many ways to scale chains for layer 1 but that will ultimately be value-destructive. Layer 2, on the other hand, doesn’t need to defend itself against 51% of attacks. Instead, they build upon the base layer and define the value of the state they contain.