Layer 1 blockchains are the backbone of the decentralized financial system. A thorough understanding of the purposes and workings of the layer 1 blockchain is necessary for a fundamental analysis of the decentralized space. In that way, you can access and appreciate the process behind the flexibility and scalability of blockchain and the principles of security and privacy they follow.
What is Layer 1 Blockchain Protocol?
Layer 1 blockchain protocol is the basis of blockchain technology. These blockchains are created as native protocols which are not based on any previous models or chains. The layer 1 blockchain is crucial in ensuring the scalability and security of the transactions. They have high efficiency in settling large numbers of transactions in less time.
This is done at a low time and low cost. Moreover, the transactions done through level 1 blockchains are highly secure and private as they follow the principle of decentralization. The cryptographic algorithms and the consensus mechanisms based on proof are used in layer 1 protocols to make them tamper-proof, so hacking these chains is impossible.
Key Characteristics of Layer 1 Blockchain Protocols
The key characteristics of layer 1 blockchain are given below.
Consensus Mechanism
Layer 1 protocols are protected by various consensus mechanisms, such as proof-of-stake, proof-of-history, and proof-of-work. These consensus mechanisms secure the integrity of the layer 1 blockchain.
Decentralization
Layer 1 blockchains are modeled on the principle of decentralization. There is no central authority to control the decision-making process. Instead, the stakeholders together make decisions through voting.
Native Tokens
Layer 1 blockchains have native tokens that users can hold and stake. These native tokens help users participate in the blockchain’s decision-making process and earn through staking.
Smart Contracts
Smart contracts form the basis of most layer 1 blockchain and help form decentralized applications (dApps) and decentralized finance (DeFi) protocols.
Security and Independence
Layer 1 protocols provide high security for the user data. The user data cannot be leaked to third parties. Moreover, layer 1 blockchains are highly independent as they stand alone without depending on any other external support.
Scalability
Scalability refers to the ability of layer 1 blockchains to handle large volumes of transactions in a short period.
Examples of Layer 1 Blockchains
Here is a list of the most important layer 1 blockchains available in the market now.
Bitcoin
Bitcoin is a layer 1 protocol that secures the world’s largest and most profitable cryptocurrency. It is highly secure and scalable. It is secured by cryptography and intense computational techniques.
Ethereum
Ethereum is the second largest layer 1 blockchain ecosystem after Bitcoin. It uses smart contracts for the first time to verify transactions using pre-determined terms and conditions. Initially, Ethereum was based on the proof-of-work consensus mechanism. However, the blockchain later adopted the proof-of-stake consensus mechanism to reduce energy consumption and increase the speed of finalization of transactions.
Algorand
Algorand is a layer 1 blockchain mechanism that distinguishes itself from Bitcoin and Ethereum based on the purely proof-of-stake consensus mechanism that it uses. It is completely decentralized in its selection and verification of blockchain validators.
Cardano
Cardano also follows the proof-of-stake consensus mechanism. It is known for lower gas fees and higher levels of decentralization, and It also allows the users to stake their native token ADA to get passive income. It also approves transactions at high speed.
Advantages and Disadvantages of Layer 1 Blockchains
The major advantages of layer 1 protocols are their features of decentralization, security, privacy, and transparency in transactions. These advantages are powered by its use of smart contracts.
Compared to layer 2 and layer 3 blockchains, layer 1 chains have limited scalability, which is a major disadvantage. This makes transactions difficult with the growth of the network. Layer 1 blockchains that use proof-of-work consensus mechanisms are more energy-consuming than layer 2 blockchains, which are said to impact the environment. Layer 1 blockchains are also less competent in terms of providing privacy to the user data.
The Bottom Line
Layer 1 blockchains are the base structures of the DeFi ecosystem on which other layers of blockchains are built. Therefore, it is important to understand them to conduct trade in the DeFi space. Even though they have certain disadvantages when compared to layer 2 blockchains, their relevance cannot be undermined.
