What Is Layer 1 vs. Layer 2 Blockchain?

Layer 1 and Layer 2 refer to different levels of blockchain architecture.
They describe how blockchain networks are structured to handle transactions, security, and scalability.

A Layer 1 blockchain is the base network itself — such as Bitcoin, Ethereum, XRP Ledger, Stellar (XLM), Hedera (HBAR), or XDC Network.
A Layer 2 blockchain is a secondary framework built on top of a Layer 1 network to improve its speed, reduce costs, or add new features — examples include Lightning Network, Polygon, and Arbitrum.

Understanding Layer 1

Layer 1 is the foundation of a blockchain ecosystem. It manages the core functions — consensus, transaction validation, and security — directly on its base protocol.

When you send Bitcoin or interact with Ethereum’s mainnet, you’re using Layer 1. These systems operate fully on-chain and do not rely on any external processing network.

Examples of Layer 1 Blockchains:

• Bitcoin (BTC): Focuses on security and decentralization through Proof of Work.

• Ethereum (ETH): Enables smart contracts and decentralized applications (dApps).

• XRP Ledger (XRPL): Provides ultra-fast settlement for global payments.

• Stellar (XLM): Specializes in cross-border remittances and asset issuance.

• Hedera (HBAR): Uses Hashgraph consensus for high-speed, low-fee transactions.

• XDC Network: Enterprise-ready Layer 1 optimized for trade finance and ISO 20022 integration.

The Scalability Problem

Layer 1 blockchains, though secure and decentralized, face a scalability challenge — meaning they can’t process enough transactions per second (TPS) to handle mass adoption.

For example:

• Bitcoin handles about 7 TPS.

• Ethereum before upgrades handled about 15–30 TPS.

• Visa handles over 24,000 TPS for comparison.

To solve this bottleneck, developers began building Layer 2 solutions that process transactions off-chain and then record the results back onto the main chain securely.

Understanding Layer 2

Layer 2 is an overlay system built on top of Layer 1. It doesn’t replace the base blockchain—it enhances it.

Layer 2 solutions move most of the transaction workload away from the main chain, reducing congestion and transaction fees while maintaining the underlying security of Layer 1.

Examples of Layer 2 Solutions:

• Lightning Network (Bitcoin): Enables instant, low-fee Bitcoin payments through off-chain channels.

• Polygon (Ethereum): A sidechain that supports faster and cheaper transactions for Ethereum dApps.

• Arbitrum & Optimism (Ethereum): Use “rollups” to bundle multiple transactions into one, improving efficiency.

• Hashport Bridge (Hedera): Facilitates cross-chain interoperability for token transfers.

How the Two Layers Work Together

Layer 1 provides trust and security, while Layer 2 provides speed and scalability.
When combined, they allow blockchains to handle global demand without sacrificing decentralization or transparency.

Here’s a simplified breakdown:

• Layer 1 = Settlement layer (where final truth is stored)

• Layer 2 = Execution layer (where activity happens faster and cheaper)

Think of it like the Internet: the physical network cables are Layer 1, while web applications like browsers and platforms that make it easier to use are Layer 2.

The Future of Layer 1 and Layer 2

As blockchain adoption grows, both layers will evolve together:

• Layer 1s are adopting upgrades like sharding and Proof of Stake to scale naturally.

• Layer 2s are becoming more advanced with zero-knowledge proofs (ZK-Rollups) and cross-chain communication tools.

The goal is a future where millions of users can interact with blockchain applications without ever noticing the layers underneath.

Summary

A Layer 1 blockchain is the main chain that records and secures transactions.
A Layer 2 blockchain is built on top to make the system faster and more efficient.

Together, they solve the blockchain trilemma — the balance between security, scalability, and decentralization — paving the way for a truly global and accessible decentralized economy.