Blockchain technology has witnessed rapid development in recent years, leading to the emergence of various layer 1 blockchains. Layer 1 refers to the foundational layer of a blockchain network, responsible for consensus, transaction validation, and overall security. In this article, we will explore the concept of layer 1 blockchains and provide a concise overview of the top protocols in this category, including their transaction processing speed, scalability, and consensus mechanisms.
Layer 1 refers to the foundational layer of a blockchain network, which is responsible for essential functions such as consensus, transaction validation, and overall security. Let’s explore these aspects in more detail:
Consensus Mechanism
Consensus is a critical component of any blockchain network. Layer 1 blockchains implement various consensus mechanisms to achieve agreement among participants on the validity of transactions and the state of the blockchain. The most common consensus mechanisms used in layer 1 blockchains include:
- Proof of Work (PoW)
In a PoW-based blockchain, participants, known as miners, compete to solve complex mathematical puzzles to validate transactions and add new blocks to the blockchain. Bitcoin is a prominent example of a PoW-based layer 1 blockchain. PoW consensus requires significant computational power, ensuring network security but often resulting in high energy consumption and limited scalability.
- Proof of Stake (PoS)
PoS-based blockchains assign the right to create new blocks and validate transactions based on the stake (ownership) of participants in the network. Instead of miners, validators are selected to participate in the consensus process. PoS consensus mechanisms aim to achieve energy efficiency and scalability by eliminating the need for intensive computational work. Ethereum is transitioning from PoW to PoS with its Ethereum 2.0 upgrade.
Transaction Validation
Layer 1 blockchains are responsible for validating transactions to ensure their integrity and compliance with the network’s rules and protocols. Each transaction goes through a validation process to verify its authenticity, ownership, and compliance with any predefined conditions or smart contract logic. Validators or miners play a vital role in this process by independently validating and including transactions in the blockchain.
Security:
- Security is a paramount concern for layer 1 blockchains. The foundational layer is designed to provide a secure and tamper-resistant environment for storing and processing data. This is achieved through the following security measures:
- Cryptographic Hashing: Layer 1 blockchain use cryptographic hashing algorithms to ensure the integrity of data. Each block contains a unique hash that is calculated based on the data within the block, making it extremely difficult to modify the data without altering the hash.
- Distributed Consensus: The consensus mechanism employed by layer 1 blockchains involves a distributed network of nodes or validators that must agree on the state of the blockchain. This distributed consensus helps prevent single points of failure and makes it more difficult for malicious actors to compromise the network.
- Immutability: Once data is added to the blockchain in a layer 1 protocol, it becomes virtually immutable. This means that the data cannot be altered or deleted without consensus from the network participants, ensuring a tamper-resistant and auditable ledger.
- Network Security: Layer 1 blockchains implement security measures to protect against attacks, including Distributed Denial of Service (DDoS), Sybil attacks, and 51% attacks. These security measures are designed to maintain the integrity and availability of the network.
By focusing on consensus, transaction validation, and security, layer 1 blockchains establish the foundation for trust, decentralisation, and transparency in the blockchain ecosystem. These protocols ensure the reliable functioning of blockchain networks and provide a secure environment for the execution of various decentralised applications and use cases.
Layer 1 blockchains play a crucial role in the blockchain ecosystem by providing the foundational infrastructure for decentralised applications (DApps), smart contracts, and various use cases.
Here are a few example scenarios where layer 1 blockchains are instrumental.
- Decentralised Finance (DeFi):
Layer 1 blockchains have become the backbone of the booming DeFi ecosystem. These protocols enable the creation of decentralised exchanges, lending and borrowing platforms, and yield farming applications. With high transaction throughput and scalable architectures, layer 1 blockchains like Ethereum, Binance Smart Chain, and Solana are well-suited for DeFi applications that require fast and cost-effective transactions. - Tokenisation and Asset Management:
Layer 1 blockchains provide the infrastructure for tokenisation and asset management. They enable the creation and management of digital assets, such as non-fungible tokens (NFTs) and security tokens, which represent ownership or value in real-world assets. Blockchains like Ethereum, Cardano, and Polkadot offer smart contract capabilities and support the development of platforms for token issuance, trading, and asset tracking. - Supply Chain and Traceability:
Blockchain technology offers transparency and immutability, making it ideal for enhancing supply chain management and traceability. Layer 1 blockchains can provide a secure and tamper-proof ledger for tracking the movement of goods, verifying authenticity, and ensuring compliance with regulations. Examples include VeChain, which focuses on supply chain traceability, and IBM’s Food Trust, built on the Hyperledger Fabric blockchain. - Gaming and Non-Fungible Tokens (NFTs):
The layer 1 blockchains are at the forefront of the NFT revolution, facilitating the creation, ownership, and trading of unique digital assets in the gaming and entertainment industries. These blockchains provide the necessary infrastructure for creating NFT marketplaces, virtual item ownership, and in-game economies. Ethereum, Flow, and Enjin are some prominent layer 1 blockchains powering the NFT and gaming space. - Decentralised Identity (DID):
Decentralised identity solutions aim to provide individuals with ownership and control over their digital identities, reducing reliance on centralised entities. Layer 1 blockchains play a vital role in DID systems by offering secure and verifiable identity management. Protocols like Sovrin, uPort, and SelfKey utilise layer 1 blockchains to enable self-sovereign identity, ensuring privacy and data protection. - Government and Public Services:
Layer 1 blockchains offer the potential to improve government services and enhance transparency in public administration. By leveraging blockchain’s immutability and security features, governments can streamline processes, reduce fraud, and provide efficient services like voting systems, land registries, and public record management. Estonia’s e-Residency program, built on the Ethereum blockchain, is a notable example of blockchain adoption in government services.
These scenarios highlight the versatility and potential of layer 1 blockchains across various industries. As the technology evolves and scales, layer 1 blockchains are poised to revolutionise sectors beyond finance, including healthcare, energy, logistics, and more.
Listed below are the top layer one blockchains.
- Bitcoin (BTC):
Bitcoin is the pioneering blockchain that introduced the world to decentralised digital currency. It operates on proof-of-work (PoW) consensus and boasts an average transaction speed of around 7 transactions per second (TPS). - Ethereum (ETH):
Ethereum is the second-largest blockchain platform and serves as a foundation for numerous decentralised applications (DApps). It is transitioning from PoW to proof-of-stake (PoS) with the upcoming Ethereum 2.0 upgrade. The current TPS is approximately 15. - Binance Smart Chain (BSC):
Binance Smart Chain is a layer 1 blockchain developed by Binance. It utilises a modified PoS consensus mechanism and offers faster transaction confirmation times, averaging 5 seconds per block, with a TPS of around 100. - Cardano (ADA):
Cardano is a PoS-based blockchain platform aiming to provide a secure and scalable infrastructure for the development of smart contracts and DApps. It supports over 1,000 TPS. - Solana (SOL):
Solana is a high-performance PoS blockchain designed for scalability and speed. It offers a TPS of up to 65,000 and aims to enable decentralised applications and decentralised finance (DeFi) solutions. - Polkadot (DOT):
Polkadot is a multi-chain network that allows various blockchains to interoperate and share security. It employs a PoS consensus mechanism and achieves a throughput of approximately 1,000 TPS. - Avalanche (AVAX):
Avalanche is a highly scalable blockchain utilising a consensus mechanism called Avalanche. It achieves sub-second finality and claims a TPS of up to 4,500. - Algorand (ALGO):
Algorand is a PoS blockchain that aims to provide a decentralised and secure platform for the development of scalable applications. It offers a TPS of around 1,000. - Cosmos (ATOM):
Cosmos is an ecosystem of interoperable blockchains that facilitates the transfer of assets and data between different networks. It employs a PoS consensus mechanism and achieves a TPS of approximately 10. - Tezos (XTZ):
Tezos is a self-amending blockchain platform that utilises PoS consensus. It aims to provide a secure and upgradable infrastructure for decentralised applications and boasts a TPS of around 30. - NEAR Protocol (NEAR):
NEAR Protocol is a sharded, developer-friendly blockchain platform designed to support decentralised applications and provide scalability. It currently achieves around 1,000 TPS. - Elrond (EGLD):
Elrond is a high-throughput blockchain platform utilising a secure PoS mechanism called Adaptive State Sharding. It claims a TPS of up to 15,000.
Conclusion
Layer 1 blockchains serve as the foundation for a variety of decentralised applications and have made significant strides in terms of scalability and transaction processing speed. The top 10 protocols highlighted in this article demonstrate the diverse approaches taken by different projects to enhance the blockchain ecosystem. As the blockchain space continues to evolve, it is essential to monitor the developments in layer 1 blockchains and their impact on various industries and use cases.
