What are layer 1 blockchains?
Layer 1 blockchains are blockchain platforms that don’t rely on any other blockchains to function. For example, Bitcoin and Ethereum do not need any other blockchains to process transactions securely. On the other hand, a layer 2 platform like Optimism would not be able to function without its underlying layer 1 (Ethereum).
Decentralized blockchain networks usually have a native crypto asset (commonly called a “coin”) to incentivize miners or validators to secure the network—for example, Bitcoin miners earn BTC and Ethereum stakers earn ETH.
In most cases, these native crypto assets are required for paying transaction fees, which are distributed to validators or miners, and also prevent the network from being attacked with a flood of transactions. Native crypto assets like BTC and ETH are often also used as digital money that users can send to each other without the need for intermediaries.
Why are there so many different layer 1 blockchains?
The reason why there’s so many different layer 1 blockchains is that it is difficult to design a blockchain platform that would be able to handle all of the use cases that blockchains are being utilized for.
For example, the Bitcoin network provides an extreme level of security for transactions and user balances, but has a very limited transaction throughput. It’s also limited when it comes to smart contracts functionality—this led to the creation of Ethereum, which allows users to create complex smart contracts and decentralized applications. Other projects then attempted to address the limited scalability of Ethereum, which led to new layer 1 blockchains like Solana and Avalanche entering the scene.
How do layer 1 blockchains work?
Different layer 1 blockchains vary significantly in terms of decentralization, consensus mechanisms and functionality. Some layer 1 blockchains like Bitcoin and Litecoin use Proof-of-Work, where the networks are secured by miners deploying computer hardware to perform computationally-intensive tasks.
Other platforms like Cardano and Polkadot use Proof-of-Stake, where validators pledge or “stake” their coins to have the right to participate in the consensus process. In such systems, validators that are found to be behaving dishonestly are penalized by having their stake reduced or “slashed”.
Layer 1 blockchains also differ immensely in terms of functionality. Some are specialized for simple peer-to-peer transactions of digital assets, while others support more sophisticated smart contracts that enable use-cases like decentralized lending or non-fungible tokens (NFTs).
