Layer 1 vs Layer 2: Comparing Layers And Consensus In Blockchain

Is your business struggling to distinguish between layer 1 vs layer 2 blockchains and assess their impact on transaction speed and security? In today’s rapidly evolving crypto layer ecosystem, selecting the right blockchain strategy is crucial for growth. MOR Software will show detailed insights to help businesses understand the differences between layer 1 vs layer 2 network and apply them effectively through this article.

What Are Blockchain Layers?

In the world of blockchain layers, each “layer” is considered a level within the overall architecture of the network. Similar to the Internet, which has different layers (protocols, applications, browsers), blockchain is also divided into multiple layers, with each one handling specific functions.

Specifically, blockchain layer 1 vs layer 2 are the two most crucial levels today:

• Layer 1 serves as the foundational base, directly recording and validating transactions.
• Layer 2 is built on top of layer 1, designed to improve scalability and performance without altering the core rules of the underlying blockchain security.

The strength of the blockchain layer 1 vs layer 2 model is that each layer focuses on solving a fundamental challenge. As a result, the modern layering network does not rely on a single level but combines multiple layers to achieve the right balance between security and real-world usability within the crypto layer ecosystem.

What Is A Layer One Network?

Layer 1 blockchain is the foundational protocol of a blockchain ecosystem. It serves as the base layer, directly responsible for recording and validating transactions on-chain. Well-known blockchain platforms such as Bitcoin, Ethereum, and Solana are considered layer 1 networks.

Core characteristics of layer 1:

• High decentralization: the network is maintained by thousands of independent nodes, reducing the risk of centralized control.
• Strong security: strict consensus mechanisms such as Proof of Work (PoW) or Proof of Stake (PoS) ensure near-impenetrable protection.
• Limited transaction throughput: Because transactions are processed directly on-chain, Layer 1 often faces congestion issues. Bitcoin handles only about 7 TPS, while Ethereum (before upgrades) managed around 15 - 30 TPS.
• High transaction fees: when the network is congested, fees on Layer 1 can rise sharply, putting pressure on cryptocurrency exchange scalability. This limitation is the key reason why Layer 2 solutions were developed to share.

Popular Types Of Layer 1 Blockchains

In the blockchain layers ecosystem, layer 1 blockchains have been continuously improved to address limitations in scalability and transaction costs. Below are the most popular types of developments.
 

Consensus Protocol Improvements

In a layer 1 blockchain, the consensus mechanism works like the “rulebook” that ensures everyone agrees on which transactions are valid. In the early days, Bitcoin relied on Proof of Work (PoW), where miners used computing power to solve complex puzzles and validate transactions.

For example, the Bitcoin network can only handle about 7 transactions per second (TPS), while consuming as much electricity as a small country. To overcome these limitations, Ethereum upgraded to Ethereum 2.0 and transitioned to Proof of Stake (PoS). 

Instead of mining with machines, validators simply stake 32 ETH (layer token) to participate in transaction validation. Together, these innovations allow the entire crypto layer ecosystem to grow in a balanced way secure, scalable, and efficient way.

Sharding

One major limitation of many layer 1 blockchains is that every node must process the entire set of transactions. Imagine a supermarket with only one checkout counter; even if thousands of customers arrive, they all have to wait in line at the same place. 

Sharding solves this issue by dividing the blockchain into smaller segments called shards, with each shard processing transactions independently. When shards operate in parallel, the system’s throughput increases dramatically.

For instance, Ethereum’s roadmap introduces up to 64 shards. If one shard can process a few hundred TPS, combined, they could push Ethereum into tens of thousands of TPS. Crucially, all shards remain tightly connected to the main chain, preserving the strong security of blockchain layers.

Thanks to sharding, a layering network does not need to sacrifice security for speed.

Modifications in Block Size

Another approach for layer 1 blockchains is adjusting the block size. A block can be thought of as a “box” that stores transactions. If the box is small, it holds fewer transactions; if the box is larger, it can store more within the same time period.

However, larger blocks come with trade-offs. As block size increases, nodes need more resources (CPU, storage, and bandwidth) to store and sync data. Smaller nodes may drop out of the network, reducing decentralization.

Therefore, expanding the block size improves speed but also raises the challenge of balancing efficiency and distribution. This trade-off directly affects cryptocurrency exchange scalability, as a blockchain security must remain fast while ensuring fair participation from all nodes in validation.

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What Is A Layer Two Network?

A layer 2 blockchain refers to protocols built on top of layer 1 to offload transaction processing from the base chain. The key point is that Layer 2 does not alter the core rules of a layer 1 blockchain but instead functions as an extension layer that boosts performance and reduces costs. This is the fundamental distinction when comparing blockchain layer 1 vs layer 2.

Instead of requiring every transaction to be processed directly on layer 1 (like Bitcoin or Ethereum), layer 2 allows most transactions to occur off-chain and only submits the final results back to Layer 1. 

Core characteristics of Layer 2:

• Faster transactions with lower fees: By handling processes off-chain, Layer 2 solutions can reach thousands of TPS while keeping costs just a fraction of Layer 1.
• Security inherited from Layer 1: Although operating on a separate layer, Layer 2 protocols are tightly anchored to the base blockchain, ensuring strong security guarantees.
• Suitable for high-volume applications: With speed and affordability, Layer 2 is ideal for DeFi, blockchain gaming, micropayments, and other use cases requiring millions of real-time transactions.

Popular Types Of Layer 2 Blockchains

In the landscape of blockchain layer 1 vs layer 2, layer 2 solutions are considered the “lifeline” for scalability challenges while still preserving the strong security of Layer 1. Below are the most popular types of layer 2 blockchains.

State Channels

State Channels are one of the simplest yet most effective layer 2 blockchain solutions. They allow two parties to conduct transactions off-chain without recording every small step on the Layer 1 blockchain. Instead, only the outcome is settled and submitted back to layer 1.

This approach is like two people playing a board game. Instead of recording each move, they only write down the final result. As a result, the main network avoids being overloaded with countless microtransactions, while still maintaining transparency when the final settlement is validated on the base chain

Plasma Chains

Plasma chains are a layer two device model designed as “child chains” anchored to a layer 1 blockchain. These child chains process transactions independently and periodically submit summarized data back to the main chain to maintain transparency and security.

The key strength of Plasma is its ability to handle a large volume of transactions without overloading layer 1. For example, Ethereum Plasma was once considered a promising solution to reduce congestion and high gas fees on Ethereum before rollups became dominant.

Still, in the broader context of smart contract blockchain layer 1 vs layer 2, Plasma provided an important foundation for research and served as a stepping stone toward more advanced scalability solutions.

Sidechains

Sidechains are independent blockchains that run parallel to the main chain and connect through bridges. Unlike Plasma, sidechains can implement their own consensus mechanisms and custom rules while still maintaining interoperability with layer 1 blockchain for transferring assets or data.

The trade-off is that sidechain security depends heavily on its own consensus rather than being directly inherited from Layer 1. Compared to other approaches in crypto layer 1 vs layer 2, sidechains offer high adaptability but can be less secure than sharding or rollups within the broader layering network.

Rollups (Optimistic & ZK Rollups)

Rollups are currently considered the most advanced layer 2 blockchain solution for addressing cryptocurrency exchange scalability. The main idea is to bundle thousands of transactions off-chain, compress the data, and then post it back to the layer 1 blockchain.

There are two popular types of rollups:

• Optimistic Rollups: Assume all transactions are valid unless challenged with fraud proof. 
• ZK Rollups: leverage zero-knowledge proofs to instantly verify transaction validity.

Blockchain Consensus Mechanisms In Layer 1 Vs Layer 2

In the world of blockchain layers, the consensus mechanism plays a crucial role in ensuring transparency and security across the network. Depending on whether it is a layer 1 vs layer 2 blockchain, different models are applied to balance security, speed, and scalability.

Proof of Work (PoW)

Proof of work is the first consensus mechanism used in layer 1 blockchains, with Bitcoin being the most well-known example. In this mining-based system, miners use powerful computers to solve complex cryptographic puzzles.

Imagine the blockchain network as a puzzle competition. Thousands of participants race to solve a riddle, and whoever solves it first gets to write the answer on the board (the blockchain). To cheat, someone would need to hire more “puzzle solvers” than all others combined - practically impossible. This is why Bitcoin remains one of the most secure systems in the crypto layer.

However, PoW has significant drawbacks. Because miners must keep computers running continuously, the system consumes massive amounts of energy. According to Digiconomist, Bitcoin’s annual energy consumption is around 143 TWh, exceeding that of many countries and accounting for about 0.65% of global electricity use.

Proof of Stake (PoS)

Proof of stake is a more modern consensus mechanism adopted by many layer 1 blockchains, such as Ethereum 2.0 and Cardano. Unlike PoW, PoS does not require miners to solve puzzles. Instead, validators must stake a certain amount of tokens to gain the right to validate transactions.

For example, in Ethereum 2.0, a validator needs to stake 32 ETH (layer token) to join the process. Honest validators earn rewards, while dishonest ones risk losing their staked ETH. This design ensures participants are incentivized to secure the network.

The biggest advantage of PoS is its energy efficiency and scalability. Studies show that Ethereum’s transition from PoW to PoS reduced energy use by up to 99.98%. In addition, PoS can handle thousands of transactions per second (TPS), a massive improvement compared to Bitcoin’s ~7 TPS. 

Hybrid/Inherited Consensus in L2

In the case of a layer two device, most solutions do not design entirely new consensus mechanisms. Instead, they inherit the security of the underlying layer 1 blockchain. In other words, Layer 2 relies on the strong foundation of Layer 1 while focusing on scalability.

Some Layer 2 solutions also use a blockchain hybrid consensus model, combining inherited security from Layer 1 with their own internal mechanisms for additional performance. For instance, a sidechain may adopt PoS internally while still bridging to Ethereum for final settlement.

This demonstrates how the balance between layer 1 vs layer 2 networks works. Layer 1 provides decentralization and security, while Layer 2 enhances scalability and efficiency across the broader crypto layer ecosystem.

The Main Differences Between Layer 1 Vs Layer 2 Blockchains

In the crypto layer ecosystem, the main differences between layer 1 vs layer 2 blockchains lie in how they handle transactions, scale the network, and maintain security. Layer 1 blockchains focus on the base protocol, while layer 2 devices introduce scalability improvements without changing the core rules of layer 1. Below is a detailed comparison table highlighting these differences:

Layer 1 Vs Layer 2 Vs Layer 3 – The Next Evolution Of Blockchain

In the multi-layer blockchain layers model, layer 3, also known as the application layer, represents a significant step forward in bringing blockchain technology into real-world use. While layer 1 focuses on security and decentralization, and layer 2 addresses scalability, layer 3 emphasizes user experience, interoperability between applications, and a diverse ecosystem.

Layer 3 provides a dedicated environment for dApps, user-friendly interfaces, and seamless cross-platform connectivity. The vision of a multi-layer blockchain model is clear:

• Layer 1 ensures security and decentralization,
• Layer 2 enhances scalability,
• Layer 3 improves real-world usability, convenience, and application interoperability.

The future of multi-layer blockchain networks aims to create a complete ecosystem. In this system, L1 serves as a solid foundation, L2 handles high transaction volumes, and L3 delivers smooth user experiences while integrating practical applications into everyday life.

This is a crucial step toward making blockchain more accessible, practical, and widely adopted across the global crypto layer.

FAQ: Layer 1 Vs Layer 2

Is Ethereum Layer 1 or Layer 2?

Yes, Ethereum is a layer 1 blockchain, providing the base layer where layer 2 solutions like Arbitrum and Optimism are built for scalability.

What is Layer 1 vs Layer 2 vs Layer 3 crypto?

Layer 1 is the base blockchain protocol, layer 2 is scaling solutions built on top of layer 1, and layer 3 is the application layer focusing on dApps, interoperability, and user experience.

Why is Layer 2 better than Layer 1?

Layer 2 is better for scalability, offering higher throughput and lower fees while still inheriting security from layer 1.

What is the difference between Layer 1 and Layer 2 throughput?

Layer 1 typically handles tens of transactions per second (TPS), while layer 2 solutions like rollups can scale to thousands of TPS.

Is Solana a Layer 1 or 2?

Yes, Solana is a layer 1 blockchain, optimized for high-speed and low-cost transactions without requiring layer 2.

Is XRP a Layer 1 or Layer 2?

Yes, XRP Ledger (XRPL) is a layer 1 blockchain, specialized in fast, low-cost cross-border payments.

In Conclusion

Understanding the differences between layer 1 vs layer 2 blockchains is crucial for businesses aiming to scale operations and maintain robust security within the crypto layer ecosystem. By strategically implementing layer 1 and layer 2 solutions, businesses can achieve both decentralization and high transaction throughput. Contact MOR Software today to ensure your business doesn’t miss out on the advantages of layer 1 vs layer 2 blockchain.