Other popular examples include Arbitrum and the Lightning Network (for Bitcoin).
Polygon: This is a multi-chain system and a popular framework for scaling Ethereum, known for its faster transaction speeds and lower costs through sidechains and other layer-2 solutions like zkEVM.
Arbitrum: A scaling solution for Ethereum that uses Optimistic Rollups to increase transaction throughput and reduce gas fees while maintaining security.
Lightning Network: A layer-2 solution built on top of the Bitcoin blockchain, designed to enable fast and cheap transactions by processing them off-chain in payment channels.
When blockchain developers use other blockchains to build their own, they are called Layer 2 blockchains. Because they use infrastructure from Layer 1 blockchains, they are more scalable and efficient. For example, Ethereum has L2 blockchains Polygon, Arbitrum, and Optimism, which are faster and cheaper. However, they are more centralized because of their smaller size. This dependence also means that L2s cannot run when L1s are down. Inversely, many L2s are experimental networks, so there’s no guarantee they’ll be as secure as L1 blockchains.
L1 blockchains have regular updates set by the community, such as Ethereum 2.0 or Bitcoin Taproot. Flexible blockchains become more secure and decentralized over time. On immutable blockchains like Ethereum, smart contracts prevent such changes. Instead, developer communities create hard forks like PulseChain. A fork blockchain is a variant of the original blockchain that involves new features and code tweaks, thus having different scalability, security, and decentralization. The teams that design Layer 2 and fork chains are often unrelated to Layer 1 founders.
Layer 3 is where the action happens. Decentralized applications (DApps) built on top of blockchains are the main attraction of Layer 3. DApps are software applications that run on a blockchain network and provide a decentralized user experience. They range from simple applications like cryptocurrency wallets to complex financial applications like decentralized exchanges, lending protocols, and prediction markets.
DApps are built on top of different blockchains, and each blockchain has a different consensus model and smart contract capabilities. Ethereum is the most popular blockchain for
It’s important to note that each layer serves a unique purpose and is essential to the operation of the blockchain ecosystem. Without a strong foundation in the lower layers, the upper layers would not be able to function properly. Therefore, it’s crucial to have a good understanding of each layer to fully appreciate the potential of blockchain technology.
