(2021-06-04) Gemini Blockchain Technology Layer1 And Layer2 Networks

Blockchain Technology: Layer-1 and Layer-2 Networks | Gemini. There are currently two primary methodologies for achieving essential blockchain scalability: Layer-1 and Layer-2 solutions.

Layer-1 solutions add utility to a native blockchain to optimize its performance. Layer-2 solutions are third-party protocols that integrate with an underlying Layer-1 blockchain to increase transactional throughput.

a Layer-1 network refers to a blockchain, while a Layer-2 protocol is a third party integration that can be used in conjunction with a Layer-1 blockchain. Bitcoin, Litecoin, and Ethereum, for example, are Layer-1 blockchains.

With Ethereum 2.0, Ethereum will transition to a Proof-of-Stake (PoS) consensus algorithm, which is expected to dramatically and fundamentally increase the capacity of the Ethereum network while increasing decentralization and preserving network security.

Sharding: Sharding is a mechanism adapted from distributed databases that has become one of the most popular Layer-1 scaling solutions, despite its somewhat experimental nature within the blockchain sector.

Ethereum 2.0 is one high-profile blockchain protocol exploring the use of shards, along with Zilliqa, Tezos, and Qtum.

Layer-2 refers to a network or technology that operates on top of an underlying blockchain protocol to improve its scalability and efficiency.

Bitcoin is a Layer-1 network, and the Lightning Network is a Layer-2 solution built to improve transaction speeds on the Bitcoin network

Other examples of Layer-2 solutions include:

Nested Blockchains

State Channels:

When a transaction or batch of transactions is completed on a state channel, the final “state” of the “channel” and all its inherent transitions are recorded to the underlying blockchain. The Liquid Network, Celer, Bitcoin Lightning, and Ethereum's Raiden Network are examples of state channels. In the trilemma tradeoff, state channels sacrifice some degree of decentralization to achieve greater scalability.

Sidechains:

Sidechains use an independent consensus mechanism to that of the original chain

Sidechains are differentiated from state channels in a number of integral ways. Firstly, sidechain transactions aren’t private between participants — they are publicly recorded to the ledger. Further, sidechain security breaches do not impact the mainchain or other sidechains. Establishing a sidechain requires substantial effort as infrastructure is built from the ground up.

Boosting Blockchain Networks’ Scalability

These strategies are not mutually exclusive.