Imagine a bustling highway during rush hour traffic, congestion, delays and always a lookout for an alternate route. Now apply that same scenario to blockchain. Networks like Bitcoin or Ethereum get congested when too many users try to transact at once. This congestion leads to sky-high fees and snail-paced confirmations, making the overall experience insipid and sometimes disappointing. Here enter blockchain layers; it is an architectural fix to scale these digital ledgers without compromising on security.
At its core, Layer 1 (L1) forms the sturdy foundation, while Layer 2 (L2) acts as an efficient overlay, handling the heavy lifting. In this article, we try to break down the basics by understanding the difference between the two and their real-world applications.
Understanding Layer 1: The blockchain backbone
Think of Layer 1 as the ground floor of a skyscraper, it’s the primary blockchain protocol where everything starts. L1 networks manage the core rules, this include the consensus mechanisms like Proof-of-Work or Proof-of-Stake and also transaction validation, and finally, the data storage. They’re decentralized, secure, and immutable, but this comes at a cost, which is, it is limited in its scalability. For instance, Bitcoin, the OG L1, processes about 7 transactions per second (TPS), while Ethereum handles around 30 TPS post its 2022 merge to PoS.
To scale, L1s need to tweak their own code. Take for example, Ethereum’s upcoming sharding. This happens by dividing the network into smaller ‘shards’, which aims to boost throughput to thousands of TPS by 2026. Other L1s like Solana use Proof-of-History for blazing speeds of up to 65,000 TPS, making it ideal for high-frequency trading. Cardano, with its research-driven approach, focuses on sustainable scaling for enterprise use, like supply chain tracking in Africa.
Purpose-wise, L1s are for foundational assets, they hold the native tokens like BTC for value storage, or ETH for smart contracts. Use cases for such L1s include peer-to-peer payments on Bitcoin or decentralized finance (DeFi) basics on Ethereum, where security is more important than speed. However, as demand surges, Ethereum’s gas fees are now hitting $50+, which is proof enough that L1s alone can’t keep up without risking centralization. Some outstanding examples of L1 include Binance Smart Chain (BNB) for cheap DeFi or even Avalanche for custom subnets in gaming.
Layer 2: The scaling supercharger
Let’s bring you back to the highway, now, picture adding express lanes to this highway, that’s what we can call a Layer 2. L2 solutions build atop L1 blockchains, offloading transactions to secondary networks for faster, cheaper processing, then batching them back to the L1 for final settlement. This preserves L1’s security while dodging its bottlenecks. No core changes needed, just plug-and-play efficiency.
Key L2 types include rollups and sidechains. Optimistic Rollups like Base assume transactions are valid unless challenged, slashing fees by 90%+. Zero-Knowledge Rollups like zk-Rollups like zkSync or Polygon zkEVM, use cryptographic proofs for instant verification, hitting 2,000+ TPS. Sidechains like Polygon PoS run parallel, bridging assets for seamless swaps.
Key examples of L1 & L2s
Bitcoin’s Lightning Network is a classic L2, enabling instant micropayments for coffee or remittances. And this can be done for fees that cost barely in cents, versus Bitcoin’s $5+ fees. On Ethereum, Arbitrum powers gaming dApps like TreasureDAO, handling millions of daily transactions without clogging the mainnet. StarkNet, another zk powerhouse, excels in DeFi lending, where speed means snagging yields before markets shift.
L2s shine in high-volume scenarios. Take for example, the NFT marketplaces that have zero-gas fees or social apps on Lens Protocol via Polygon, they all are thriving. In 2025, with DeFi TVL at $150 billion, L2s capture 70% of Ethereum activity, as per Chainalysis.
So, to put it simply, blockchain layers aren’t rivals, they’re partners. While L1 provides the unshakeable core and ensures trust, L2 unlocks mass adoption, delivering usability by making crypto practical. Then why not scale on L1 itself? It’s because it risks bugs and centralization, it wouldn’t be able to increase the TPS or lower cost. L2s, too, have their drawbacks; they can face bridge hacks and sometimes rely too heavily on the L1 uptime.
While L1 and L2s continue to grow and integrate, we are standing at the cusp of more innovation with L3s, which are app-specific layers that are likely to emerge. But we will get to that another time, for now dabble between blockchains L1 & L2s to understand the realm better.