The blockchain is like onions, they both have layers. Onions have layers. The blockchain also has layers.
The More you peel or uncover each layer, the more new innovations you get to discover.
Let's peel the blockchain layers one after the other.
1.Layer "0" or Cosmos
Cosmos is the most well-known example of a Layer "0" protocol. Layer 0 is the major foundation of the layers
They provide open-source tools such as Tendermint, Cosmos SDK, and IBC to help developers easily create their own blockchains that can communicate with each other. Their aim is to create the "Internet of Blockchain".
Projects like Binance, Crypto.com, and Polygon were created using Cosmos.
Layer "0" protocols allow cross-chain interoperability between Layer 1 projects.
This is a major issue with Layer 1; once you're in the ecosystem, it's quite hard to move to another — Layer "0" fixes that.
Not all blockchains built on the same Layer "0" will have the same design.
They can use different consensus mechanisms, block parameters, etc.
- Layer "1" Blockchain.
Layer "1" is the base blockchain; it can validate and finalize transactions using its own network. Examples of Layer "1" blockchain projects are Bitcoin, Ethereum, and Cardano.
Layer "1" blockchain networks have their own native token, also known as a coin, which is used to pay transaction fees.
Layer "1" networks have issues with scaling. When the blockchain struggles to process the number of transactions the network is requiring, the transaction fees increase.
When addressing scaling, you’re faced with the Blockchain Trilemma, a term coined by Vitalik Buterin.
This is where you're trying to balance decentralization, security, and scalability. All scaling solutions will attempt to strike a balance between these three.
There are three main approaches to improving a Layer 1's scalability: block size, changing the consensus mechanism, and sharding.
*Increase Block Size
If a Layer 1 network is struggling to handle the number of transactions required, you can increase the block size. This will allow more transactions to be processed in each block.
*Consensus Mechanism
Changes
Some consensus mechanisms are less scalable than others.
For example, the proof-of-work consensus mechanism is less sustainable and scalable than proof-of-stake.
*Sharding
Put simply, Sharding is where a set of data is split into smaller, more easily managed shards. This is an easy way to help spread the load.
Think about eating a cake, it's much easier to eat it once it's cut into slices and handed out to other people.
This helps spread the workload and, in turn, increases the transaction speed.
- Layer "2"
Layer "2" protocols are built on top of the Layer "1" blockchain to address Layer 1's scalability issues.
Two things that Layer "2" can improve are transaction speed (how long one transaction takes), and transaction throughput (how many transactions the network can process in a defined time period).
When the Layer 1 network becomes congested, Layer 2 can pick up the slack to improve transaction times and lower transaction fees.
Most airdrops trending now are layers "2"
Examples of layers "2"
Optimism
Arbitrum
Polygon zkEVM
Starknet
Celer
- Layer "3"
Layer "3" is the protocol(s) that enables blockchain-based applications like dApps, games, storage, etc.
Layer 3 is often referred to as the “application layer”.
Layer "3" is what gives the base blockchain function outside of just transactions.
Most Layer 1 blockchains allow you to easily build Layer 3 projects directly onto their network, but this isn't possible with Bitcoin before now.
Ethereum, Solana, and Cardano have flourishing Layer 3 ecosystems that enrich their blockchain.
It may be important to note that each blockchain uses a different programming language.
This means that Layer 3 applications that provide cross-chain functionalities must be multilingual. For example, translating from Solidity for Ethereum to Haskell for Cardano.
Layer 3 gives the layers below real-world applications outside of just transactions. Now, you can create NFTs, swap your tokens, play games, and so much more. The application layer unlocks the blockchain's full potential.