Layer 1 Vs. Layer 2: Which Blockchain Layer Should You Focus On

Quick Summary: The blog is a detailed guide to layer 1 vs. layer 2 blockchain networks. It will help you understand what is the difference between layer 1 and layer 2 and which is better between these two. We have differentiated both layer 1 and layer 2 blockchain networks based on multiple factors. 

Owing to its decentralized, transparent, secure, and tamper-proof nature, the demand for blockchain technology is skyrocketing. It is anticipated that the blockchain market size will grow at a whopping CAGR of 90.1% from 2025 to 2030. While it clearly demonstrates the transformative power of blockchain, one of the biggest challenges individuals and organizations that adopt blockchain face is scalability. 

You read that correctly! The underlying blockchain networks often struggle to keep pace with evolving business requirements, which further leads to operational inefficiencies. Now the question is why scalability matters in blockchain networks. The answer is simple- to make the blockchain-powered system capable of handling increasing workloads and meeting evolving business needs. 

This scalability challenge has led to the development of different approaches, primarily categorized as Layer 1 and Layer 2 blockchain solutions. Understanding both these layers is crucial for anyone looking to leverage blockchain effectively. If you want to get in-depth guidance on Layer 1 Vs Layer 2, this blog is for you. It explains every difference between Layer 1 versus Layer 2 blockchain networks and the benefits, working, types, and examples of Layer 1 and Layer 2 networks. 

Let’s begin!

The Significance of Scalability in Blockchain

The first thing that we need to understand before exploring the difference between two important layers of blockchain is why scalability matters in blockchain. 

To Facilitate Faster Transactions 

A blockchain’s ability to process many transactions quickly is directly associated with its scalability. A higher processing rate means transactions are confirmed faster, which can help deliver a better user experience. It is crucial for applications where instant interactions and high transaction volumes are a priority. 

To Ensure Accessibility and Cost-Efficiency 

The next reason to think about scalability in the blockchain is to increase adaptability by making the solution more accessible and cost-efficient for both individuals and companies. In other words, lower costs encourage more people to use the technology and make blockchain-based applications feasible in various sectors.

To Guarantee Network Stability and Reliability

Boosting scalability makes blockchain networks more stable and dependable. It reduces the chance of bottlenecks, delays, and transaction pile-ups during busy periods. A scalable blockchain can handle increasing numbers of users and changing transaction volumes without sacrificing performance or security.

To Pave a Seamless Path for Growth and Innovation

Scalability brings innovation and ecosystem growth by allowing the creation of highly advanced and sophisticated decentralized applications (DApps), decentralized finance (DeFi) platforms, and other blockchain apps and solutions. With better scalability, developers can create new applications and features that were previously restricted by network limitations.

Layer 1 (L1) Vs. Layer 2 (L2) Blockchain: Definition 

What is Layer 1 or L1 Blockchain Scaling Solution

Also known as the base layer, L1 blockchains set the foundation for the blockchain ecosystem that focuses on enhancing security, scalability, decentralization, and transparency via consensus algorithm improvements, sharding, network architecture, and other mechanisms. 

Some examples of Layer 1 blockchain are: Bitcoin, Ethereum, and Solana.

What is Layer 2 or L2 Blockchain Scaling Solution

Layer 2 or L2 blockchain scaling solutions are created considering Layer 1 as the base network. Doing this improves scalability and assures high transaction throughput while ensuring complete integrity of the blockchain network. 

Some examples of Layer 2 blockchain scaling solutions are: State channels, sidechains, and rollups.

Layer 1 Blockchain Vs. Layer 2 Blockchain: Comparing Benefits 

Check out some amazing advantages of Layer 1 and Layer 2 blockchain scaling solutions:

Layer-1 Vs. Layer-2 Blockchain Benefits

Layer 1 versus Layer 2 Blockchain Networks: Comparing Working 

While Layer 1 and Layer 2 both are highly popular blockchain networks, there is a significant difference in the working of Layer 1 and Layer 2.  

Layer 1

Layer 1 blockchains perform the basic blockchain functions, including executing transactions and creating new blocks. They are comparatively slower and less scalable than Layer 2 blockchains, but they offer a high level of security. Here is the stepwise process to understand its working: 

• Transaction initiation: A user initiates a transaction by requesting to send cryptocurrency or other digital assets to another user.

• Transaction verification: The network’s nodes, which are computers participating in the blockchain, first verify the transaction’s validity by checking the sender’s balance to make sure they have sufficient funds to ensure a successful transaction. 

• Block creation: It creates one group or block for all transactions that are validated in the last step. 

• Consensus mechanism: The network’s nodes use a consensus mechanism to agree on which block of transactions to add to the blockchain.

• Block addition: Once a consensus is reached, the new block is added to the blockchain. It automatically creates a permanent record of the transaction; this record cannot be altered. 

• Transaction confirmation: The recipient receives the cryptocurrency or digital assets, and the transaction is confirmed on the blockchain.

Layer 2

Layer 2 blockchains or L2 blockchains are third-party applications that depend on Layer 1 to perform transactions. Let’s understand its functioning:

1. Setting up the L2 Network: Taking Layer 1 as the base layer using multiple technologies like state channels, rollups, or sidechains, a dedicated network or protocol is created on top of it. 

2. Off-Chain Transactions: In this step, users interact and conduct transactions within this Layer-2 network. The processing and verifications of these transactions are done independently and don’t require any involvement from the L1 blockchain.

3. Batching and Summarization: The third step groups together different L2 transactions in one batch or summarizes them into a concise form. This reduces the amount of data that needs to be recorded on the main blockchain.

4. Regular Updates to Layer-1: The Layer-2 network regularly and timely submits updates or summaries of the batched transactions to the Layer-1 blockchain. These updates are about submitting cryptographic proofs or state changes to ensure the integrity of the off-chain transactions.

5. Final Settlement on Layer-1: The Layer-1 blockchain validates the updates received from the Layer-2 network and records the final state of the transactions. This ensures that the security and immutability of the main blockchain protect the Layer-2 transactions.

Also Read: Blockchain in Peer-to-Peer (P2P) Lending Platforms: A Comprehensive Guide

Layer 1 Vs. Layer 2 Blockchain Network: Key Differences in Tabular Form

To help you easily understand the difference between layer 1 and layer 2 blockchain or which among these two you should focus on 

L1 Vs L2 Scaling Solutions 

Layer 1 Vs. Layer 2 Blockchain: A Detailed Comparison 

As aforementioned, both L1 and L2 differ in terms of scalability, transaction processing, security, decentralization, and implementation complexity. Let’s read the differences between Layer 1 and Layer 2 in detail for better understanding and clarity. 

Scalability: Layer 1 Vs. Layer 2 Blockchain

Layer 1 alters the foundational blockchain architecture to enhance scalability. L1 optimizes core elements like the consensus mechanism and block size to handle more transactions and improve overall network speed.

On the other hand, Layer 2 solutions work on top of the base blockchain. It enhances scalability via off-chain transaction processing and by using secondary protocols. By managing transactions separately, they reduce the load on the main chain and accelerate throughput without altering the original protocol. 

Transaction Processing: Layer-1 Vs. Layer-2 Blockchain

Layer 1 transactions occur directly on the main blockchain, which can become a bottleneck during peak usage. It can further lead to delays. The L1 focuses on enhancing the efficiency of processing transactions at the protocol level.

Layer 2 solutions execute transactions outside the main blockchain or through parallel systems, relieving congestion and enabling faster speeds. This off-chain processing promotes more efficient and cost-effective transactions. 

Security and Decentralization: Layer 1 Versus Layer 2 Blockchain 

Layer 1 focuses mainly on security and decentralization as modifications to the core protocol can affect network stability and trust. Maintaining strong security and decentralization is vital to earn the trust of users and ensure the reliability of the network.

Layer 2 blockchain presents unique security challenges, such as disputes within channels and ensuring data accessibility, which must be addressed to preserve the integrity and reliability of off-chain transactions. It definitely enhances scalability but involves great concerns for security and decentralization.

Explore More: How to Build a Decentralized Application?

Implementation Complexity: Layer 1 Vs. Layer 2

Layer 1 solutions implementation requires making substantial changes to the blockchain’s fundamental code. It can be difficult and necessitate collaboration among the participants of the network. Alterations to the core protocol can also create vulnerabilities and demand thorough testing. 

Implementing Layer 2 solutions doesn’t involve that much complexity and can be simple as they operate on top of the base protocol and concentrate on improving scalability through off-chain processing. 

L1 Blockchain Vs. L2 Blockchain: Comparing Types

Take a look at different types of L1 and L2 blockchains: 

Layer 1 Blockchain Types

• Increased block size

• Updated Consensus mechanism

• Sharding 

Layer 1 Blockchain Types

• Rollups

• Side Chains

• State Channels

Examples of Layer 1 and Layer 2 Blockchain Scaling Solutions 

Check out real-world examples of Layer 1 and Layer 2 blockchain solutions:

Also Read: How to Build dApp on Solana: A Step-by-Step Guide

Layer 1 Versus Layer 2: Comparing Use Cases

Both Layer 1 and Layer 2 can be used in different scenarios. Here are common use cases to check out:

Layer 1 Blockchain Solutions Use Cases

• High-volume financial transactions: Layer 1 blockchains don’t rely on third parties or intermediaries like banks to conduct transactions. Therefore, they can be used to process a large number of financial transactions quickly and efficiently. L1 has a built-in mechanism that validates and confirms transactions. Layer 1 solutions are perfect for developing cryptocurrency exchanges, payment processing platforms, and cross-border payment apps. 

• DeFi or decentralized finance- There are apps that are built on blockchain technology and aim to render benefits like high transparency, accessibility, and efficiency than traditional finance. Layer 1 blockchains provide the infrastructure for DeFi applications to facilitate decentralized exchanges, lending and borrowing platforms, and yield farming.

You may also want to read: How to Build a Decentralized Application?

Layer 2 Blockchain Solutions Use Cases

• Microtransactions and micropayments: Layer 2 solutions make small transactions feasible by lowering the transaction fees. It creates new opportunities for content monetization, in-game purchases, and IoT payments.

• Privacy-preserving applications: Layer 2 solutions advanced cryptography to prevent the integrity and privacy of transaction details. It can be used for anonymous voting, conduct confidential financial transactions, and ensure secure identity management. 

4 Factors to Keep in Mind When Selecting Between Layer 1 and Layer 2 Blockchains

Layer 1 Vs. Layer 2 network, the entire blog solely talks about this. Along with this, it is also crucial to understand what factors to consider when choosing between Layer 1 and Layer 2 blockchain. Let’s delve deeper into this: 

Scalability Requirements 

The first important factor is scalability. Evaluates the scalability requirements of the blockchain network. Consider transaction throughput, latency, and cost. Figure out which among Layer-1 and Layer-2 solutions are suitable to overcome the scalability-related problems that arise in a particular network.  

Security and Trustlessness

Another key factor to keep in mind is the security and trustlessness both layer-1 vs. layer-2 scaling solutions. Find the balance between achieving higher transaction capacity, maintaining robust security, and preserving decentralization. Prioritize solutions that safeguard the network’s dependability and trustworthiness.

Complexity with Implementation

Evaluate the difficulty and practicality of deploying both layer-1 and layer-2 blockchains.  Factors to consider include the resources needed for development, the level of collaboration required among network participants, and the potential risks of altering the base protocol compared to implementing separate, parallel solutions.

Use Cases and Application Requirements

Take into account the particular applications the blockchain network is designed to support.  From L1 vs. L2 blockchains, determine which is a better fit to achieve the expected performance, feature set, and user experience requirements of these applications.

If you are still unsure about which blockchain solution from Layer 1 and Layer 2 would suit your requirements, connect with a reputed blockchain development company or hire blockchain developers for strategic consulting services. 

You may wish to read: List of Top 20 Blockchain Development Companies in 2025 to Develop Secure Blockchain Solutions.

Layer 1 Vs. Layer 2: Which is Better

Now that you have explored both the blockchain scaling solutions thoroughly let’s read further to know when to choose what or which of these two is better. Firstly, you should understand that it is not about being better than one another as both Layer 1 and Layer 2 blockchains have their respective significance.

Depending on the particular use case or goal you want to attain, you can choose from these blockchain layers. Layer 1 is crucial for fundamental improvements and long-term scalability, whereas layer 2 offers faster and more immediate solutions to network congestion and high fees. There are ample businesses that are using a combination of both Layer 1 and Layer 2 to achieve optimal scalability without sacrificing security or decentralization.

Conclusion 

Layer 1 and Layer 2 both blockchain solutions are perfect for a myriad of use cases depending on the level of scalability they offer. This comprehensive guide to Layer 1 Vs. Layer 2 sheds light on both these solutions by including their benefits, various types, real-world examples, and detailed differences. To help you choose one from the two, we have also included different use cases and scenarios in which you can use Layer 1 and Layer 2 blockchain scaling solutions.