Layer-1 in the crypto ecosystem refers to the main networks. It is a shared structure that provides the basic functions of the network and is the fundamental layer of blockchain technology. Bitcoin, Ethereum, Avalanche (AVAX), and many other major cryptocurrencies use Layer-1 blockchain technology.
Transactions are verified by miners on the network and added to the blockchain. This verification process is an important step in ensuring the security of the cryptocurrency. However, due to the limitations of Layer-1, the scalability of the network can be increased and transaction times can be shortened by using additional layers such as Layer-2 protocols.
So what is layer2?
Layer2 is an additional layer added on top of Layer 1 in the crypto ecosystem to increase transaction efficiency. Layer-2 protocols are created to solve the transaction speed and scalability issues of Layer-1 blockchain.
The cryptocurrencies listed under Layer-2 coins are cryptocurrencies that belong to projects that emerged to solve scalability issues and make improvements on the main chain. Examples of these cryptocurrencies include Polygon (MATIC), Immutable X (IMX), Loopring (LRC), Curve (CRV), and OMG Network (OMG).
That’s correct. In summary, Layer 1 and Layer 2 represent different layers of the network. Layer 1 provides the basic functions of the network and manages the direct addition of transactions to the blockchain. Layer 2, on the other hand, increases the scalability of the network and reduces transaction times. For example, Lightning Network serves as the Layer 2 of the Bitcoin network. It allows transactions to be processed outside the Layer 1 and enables faster transaction times and lower fees. Lightning Network also increases the scalability of the network and allows direct transactions between nodes.