What is a Layer-1 Blockchain?
A layer-1 blockchain is typically understood to be a blockchain that serves as the underlying infrastructure for other applications or services. These types of blockchains are often referred to as “base” or “foundation” layer blockchains.
A layer-1 blockchain is responsible for providing the core functionality and security of the blockchain network. It is responsible for verifying and recording transactions, and for maintaining the integrity of the data on the blockchain.
Layer-1 blockchains are typically more scalable and performant than layer-2 or layer-3 blockchains, which are built on top of them and add additional functionality. Examples of layer-1 blockchains include Bitcoin, Ethereum, and Litecoin.
What is a Layer-2 Blockchain?
Layer-2 blockchains are blockchains that are built on top of a layer-1 blockchain and are designed to add additional functionality or scalability to the base blockchain. These types of blockchains are often called “off-chain” or “second-layer” blockchains.
Layer-2 blockchains are typically designed to handle a specific type of workload or to solve a particular problem, such as increasing transaction throughput or enabling confidential transactions. They operate in parallel to the base layer-1 blockchain and communicate with it in order to validate and record transactions.
Some examples of popular layer-2 blockchains include the Lightning Network (a payment network built on top of the Bitcoin blockchain), Polygon (formerly known as Matic Network is a decentralized protocol and infrastructure for building and connecting Ethereum-compatible blockchain networks) and the Loopring Protocol (a decentralized exchange protocol built on top of Ethereum).
Layer-3 blockchains are blockchains that are built on top of a layer-2 blockchain and are designed to add even more functionality or scalability. These types of blockchains are often called “third-layer” blockchains.
Layer-3 blockchains are typically even more specialized than layer-2 blockchains and are designed to handle specific types of workloads or solve specific problems. They operate in parallel to the base layer-1 and layer-2 blockchains and communicate with them in order to validate and record transactions.
There are not many examples of layer-3 blockchains, as they are a relatively new concept. However, one example of a layer-3 blockchain is the Chainlink decentralized oracle network, which is built on top of Ethereum and provides secure, reliable data feeds to smart contracts on the Ethereum blockchain.