Layer 1

How does a layer 1 work?

Every layer 1 has its own rules, its own cryptocurrency and its own security. The Bitcoin network is secured by proof of workProof of workA consensus method where the right to add the next block to a blockchain goes to whoever first solves a hard computing puzzle., and the Ethereum network by proof of stakeProof of stakeA consensus method where crypto is locked up as a stake for the right to create blocks, and anyone who cheats can lose part of that stake.. Nobody else has to vouch for what is recorded there.

You can compare a layer 1 to the land registry. That is where it is finally recorded who owns what, and that record is the one that counts.

Why talk about layer 1 and layer 2?

A layer 1 can only handle a limited number of transactions at a time, because many nodes around the world have to check each one. When lots of people want to use the network at once, network feesNetwork feeA fee paid to a crypto network, not to a bank or company, for including your transaction in a block. go up.

To ease this, systems have been built on top of layer 1 networks. They are called layer 2Layer 2A system built on top of a blockchain such as Ethereum or Bitcoin to make transactions faster and cheaper than on the base network itself.. They process transactions faster and more cheaply, but rely on the layer 1 to settle them. The Lightning NetworkLightning NetworkA payment network on top of Bitcoin that makes bitcoin payments almost instant and cheap, without recording each payment on the blockchain. is one such system on top of Bitcoin.

When people talk about a "layer 1 coin", they usually mean the base network's own cryptocurrency, such as bitcoin, ether or SOL.