Layer-1 blockchain refers to the base infrastructure of a cryptocurrency project. This layer is a set of solutions used to improve the base protocol and make the overall systems more scalable. Layer-1 blockchain is the foundation blockchain that allows you to build DApps (Decentralized Applications) and other blockchains in some cases.
Bitcoin and Ethereum blockchains are the most famous examples of Layer-1 blockchain, with Cardano, Solana, and Polkadot fast gaining much ground in the blockchain ecosystem. Each of these Layer-1 protocols has its unique token referred to as native tokens.
The Problem with Layer-1 Blockchain
The biggest problem with Layer-1 solutions was laid out by Ethereum founder Vitalik Buterin, an issue he referred to as the “scalability trilemma.” Blockchain projects have to make a trade-off between three important properties when optimizing their architecture – decentralization, security, and scalability – popularly referred to as the blockchain trilemma.
Sharding, a popular Layer-1 solution, helps with the scalability issues of Layer-1 blockchains by splitting transactions into lighter bits called “shards”, enabling transactions to be processed simultaneously, consequently leading to a faster transaction speed.
High transaction volumes on the Ethereum blockchain due to many running DApps have led to high transaction fees at peak periods of the market.
This has led to the rise in building Layer -2 scaling solutions, which increased the available transaction limits and reduced transaction costs.
Future of Layer-1 Blockchain
It is expected that Layer-1 blockchains will co-exist as the blockchain industry and various possible blockchain architectures are continually being explored. The blockchain technologies implemented on Layer-1 protocols vary with each blockchain project as they seek to tackle a diverse set of issues.
For example, DeFi blockchains are often specialized across several asset management, money market protocols, DEXs providing liquidity, and derivatives.