What is Layer 1 Blockchain? Full Explanation and Examples

If you want to send Bitcoin from your wallet to another, your transaction will take 15 seconds to several minutes.

Why is that? Transactions on the blockchain are sometimes slow due to network congestion. Not only that. Not only that, the gas fees that must be paid are often quite high.

Why does the blockchain have limited transaction processing capabilities? This article will discuss the architecture of layer 1 blockchains that can potentially hinder transaction processing.

Brief Summary:

1. Layer 1 blockchain is the base layer of a blockchain architecture.
2. Layer 1 blockchain works to verify and execute all transactions on the network.
3. Examples of layer 1 blockchains are Bitcoin, Ethereum, Solana, and BNB.

Definition of Layer 1 Blockchain

Simply put, a layer 1 blockchain is the base layer of a blockchain architecture. So, when we talk about blockchains such as Ethereum and Solana, we are referring to their layer 1 architecture.

Layer 1 blockchains validate and execute transactions independently, without the support of other networks. Transaction fees are paid in cryptocurrency, usually the blockchain's native token.

How Layer 1 Blockchain Works

Blockchain works like a decentralized ledger. All transactions are recorded on the blockchain and cannot be manipulated or changed. The data is not stored on a single server or computer, but distributed across several computers called nodes.

Key Features of Blockchain Technology

To understand how layer 1 blockchain works, we need to understand the key features that make up the security, transparency, and efficiency of blockchain technology.

1. Distributed Ledger Technology: Everyone in the network can access the same ledger and view all transactions. Each transaction is recorded only once and cannot be changed by anyone.
2. Immutable Records: No one can change or tamper with transactions once they are recorded in the ledger. If an error occurs in a transaction, a new transaction must be created to reverse it. Both transactions can be seen in the ledger.
3. Smart Contracts: All agreements and decisions on the blockchain are automatically executed by smart contracts when the terms and conditions are met. Smart contracts speed up transactions, reduce dependence on third parties, and ensure transparency and security.
4. Cryptography: Cryptography is a method of securing transactions and data on the blockchain. There are two cryptographic keys held by users, namely public keys and private keys. Public keys serve as addresses for receiving crypto and data, while private keys provide full access and control over assets.

How Blockchain Records Transactions

Blockchain technology records all transactions securely and transparently in the following ways.

1. Transactions are Recorded in Blocks: A block contains details of asset flows, who are involved, when, and the transaction amount.
2. Blocks are Connected: Each block is connected to the previous and subsequent ones, forming a secure data chain. The chain is secured with cryptographic hashes that serve as unique identification numbers for each block.
3. Blocks Form a Blockchain: Blocks are grouped into an immutable blockchain. Each time a new block is added, the blockchain becomes more secure.

Examples of Layer 1 Blockchains

Layer 1 is the main layer of a blockchain, so the blockchain names that are often thrown around are examples of layer 1 blockchains.

Bitcoin

The first and largest cryptocurrency today is Bitcoin, which operates on the Bitcoin blockchain. Bitcoin was created as a digital alternative to the national currency during the 2008 monetary crisis. This currency is distributed and traded through this blockchain.

The Bitcoin blockchain uses a Proof-of-Work consensus mechanism, and decisions are executed automatically by smart contracts.

Ethereum

Ethereum was launched in July 2015 not only as a blockchain for storing cryptocurrency, but also as a decentralized platform for designing smart contracts and dApps without third-party intervention. Ethereum's native token is Ether, which serves four main uses:

1. Traded as a digital currency
2. Investment instrument
3. Purchasing goods and services
4. Paying transaction fees on the Ethereum network

Also Read: Ethereum vs Bitcoin: Which is the Better Investment?

BNB Chain

The BNB blockchain includes Binance Chain, launched in 2019, and Binance Smart Chain, its latest version, released in 2020.

Binance focuses on offering fast and decentralized trading options. A year later, Binance Smart Chain was launched to compete with Ethereum and serve as a blockchain that accommodates the development of dApps (Decentralized Applications).

Although positioned as a competitor to Ethereum, Binance Smart Chain is also compatible with the Ethereum network. Developers can easily migrate dApps between these two blockchains.

Binance uses a Proof-of-Stake Authority consensus mechanism. Validators must stake a minimum of 10,000 BNB and operate publicly, so their reputation is also at stake.

Solana

Solana is known as the first web-scale blockchain that supports transaction speeds of up to 65,000 transactions per second. This Layer 1 blockchain introduces the innovative Proof-of-History consensus mechanism. Each node in Solana has a clock that allows the network to verify the time and order of transactions without waiting for confirmation from other nodes, thereby reducing network congestion.

Advantages and Disadvantages of Layer 1 Blockchain

Advantages of Layer 1 Blockchain

The layer 1 blockchain technology has several advantages, such as:

1. Open: Blockchain is accessible to anyone.
2. Verifiable: Information on the blockchain can be viewed and verified by anyone.
3. Permanent: Data on the blockchain cannot be manipulated or deleted.
4. Efficient: Blockchain technology eliminates third-party intervention in transactions. As a result, transaction finalization becomes faster and smoother.
5. Secure: Blockchain uses hashing techniques to store transactions in blocks.

Disadvantages of Layer 1 Blockchain

Layer 1 blockchain still carries several disadvantages, such as:

1. Scalability: Layer 1 blockchain has difficulty handling an increasing number of transactions and users without sacrificing security or decentralization.
2. Energy Consumption: Verifying transactions on the blockchain requires a lot of energy.
3. Time-consuming: If an error is present in the data entered into a block, it cannot be corrected. The entire block’s code must be rewritten, which is time-consuming and costly.
4. High Implementation Costs: Blockchain setup and maintenance are more expensive than traditional databases.
5. Performance: Blockchain requires more time to process and verify transactions.

Layer 1 Blockchain Comparisons

Each layer 1 blockchain is designed with its own goals and uses. Here is a comparison between several well-known layer 1 blockchains.

Conclusion

Layer 1 blockchain refers to the basic architecture of blockchain that performs its main tasks, namely verifying and executing transactions. Well-known blockchains that we are familiar with, such as Bitcoin and Ethereum, are examples of layer 1 blockchains.

Layer 1 is not the only architecture that exists in blockchain. To address the various disadvantages of layer 1 blockchains, layer 2 innovations have emerged as a solution. What is layer 2 blockchain? Learn its definition and advantages in the article What is Layer-2 Blockchain? How it Works and Advantages Over Layer-1.