I Keep Hearing About Layer-1 and Layer-2, What Does That Mean?

kris baerwald
Jul 23
4 min read

Alright, let’s dive into explaining layer-1 and layer-2 blockchain protocols as if you’re completely new to the concept. I’ll keep it simple, use a fun analogy, and make sure it’s clear how they work and how they’re different, all while explaining how they talk to each other.

What is a Layer-1 Blockchain Protocol?

Imagine a layer-1 blockchain as the main highway in a big city. This highway is the foundation where all the important traffic—like cars, buses, and trucks (which represent transactions)—travels. It’s the core system that handles everything: recording who sends money to whom, who owns what, or what happens in a game or app. A layer-1 blockchain is built from the ground up to be secure, shared, and permanent.

Examples of layer-1 blockchains include:

Bitcoin: Tracks digital money (BTC).

Ethereum: Tracks money and runs apps like games or finance tools.

Solana: A super-fast highway for lots of transactions, like trading digital collectibles.

How Does a Layer-1 Blockchain Work?

Here’s how it works, step by step, using the notebook analogy:

Writing Down Actions (Transactions):

When you do something, like sending $5 to your friend, you write it in the notebook. This is a transaction. For example, “I gave $5 to Sarah.”

In a blockchain, a transaction is any action, like sending money, buying a digital pet, or voting in a game.

Checking the Notes (Consensus):

A group of people (called nodes, which are just computers) checks your note to make sure it’s legit. Did you really have $5 to give? Did Sarah agree to the trade?

They use a special rule to agree, like Proof of Work (Bitcoin’s rule, like solving a puzzle) or Proof of Stake (Solana’s rule, like voting with tokens you own). It’s like everyone saying, “Yup, that $5 trade is real!”

Adding a Page (Blocks):

Once everyone agrees, your note gets added to a new page in the notebook, along with other people’s notes (like “Tom bought a digital pet” or “Lisa sent $10”). This page is called a block. Each block holds lots of transactions, like a page full of notes.

Locking the Pages (The Chain):

Every page gets locked to the one before it with a special code, like a chain linking them together. This makes the blockchain. If someone tries to change an old page (like saying you didn’t send $5), the chain breaks, and everyone notices.

This keeps everything safe and unchangeable.

Sharing the Notebook (Decentralization):

Everyone in the city gets a copy of the notebook, and they update it whenever a new page is added. No single person owns it, so no one can cheat or lose it.

In the real world, these “people” are computers all over the world, keeping the blockchain honest.

Making It Work for Everyone:

Layer-1 blockchains like Solana are designed to handle lots of notes (transactions) quickly and cheaply. Solana, for example, uses a trick called Proof of History to keep track of time, like a super-fast clock that makes sure notes are written in the right order without delays.

So, layer-1 is the main system—the highway or notebook—where everything important happens. It’s secure, shared, and built to last.

What is a Layer-2 Blockchain Protocol?

Now, imagine the main highway (layer-1) is getting crowded because too many cars (transactions) are trying to use it. It’s still awesome, but it can get slow or expensive to travel on during rush hour. A layer-2 blockchain protocol is like building a fast train system above the highway to help move people (transactions) more quickly and cheaply.

Layer-2 doesn’t replace the highway; it works on top of it to make things faster or easier. It handles some of the traffic off the main highway, then brings the important stuff back to the highway to be recorded in the notebook.

Examples of layer-2 protocols include:

Lightning Network (for Bitcoin): Speeds up small payments, like buying coffee.

Arbitrum or Optimism (for Ethereum): Makes apps and transactions faster and cheaper.

State Channels or Rollups: Ways to bundle lots of transactions before sending them to layer-1.

How Does a Layer-2 Blockchain Work?

Let’s stick with our notebook analogy, but now think of layer-2 as a sticky note system that helps the main notebook handle more work without getting overwhelmed. Here’s how it works:

Doing Work on Sticky Notes (Off-Chain Processing):

Instead of writing every single action (like “I gave Sarah $1, then $2, then $3”) directly in the big notebook, you and Sarah use sticky notes to track your trades. This is called off-chain work because it happens outside the main notebook.

For example, in the Lightning Network, you and Sarah open a “channel” (like a private sticky note) and write down all your trades there.

Summarizing to the Notebook (Settling on Layer-1):

When you’re done trading, you take the final result (like “I owe Sarah $6 total”) and write just that in the main notebook (layer-1). This saves space and time in the big notebook. Layer-2 bundles lots of actions into one summary to keep the main highway less crowded.

Keeping It Safe:

Even though you’re using sticky notes, they’re still connected to the main notebook’s rules. The sticky notes are designed so no one can cheat, and the main notebook checks the final result to make sure it’s legit.

For example, rollups bundle thousands of transactions, do the math off-chain, and send a tiny proof to the layer-1 blockchain to confirm everything is correct.

Talking to Layer-1 (Communication):

Layer-2 and layer-1 are always in touch. The layer-2 system (sticky notes) sends important updates to the layer-1 notebook to make sure everything is recorded permanently.

For example, if you and Sarah finish your trades on the sticky note, you “close the channel” by sending the final balance to the layer-1 blockchain (like Bitcoin or Ethereum), and it gets locked into the notebook.

Summary

Layer-1 is the main highway or notebook where all transactions are recorded forever. It’s secure, shared, and handles everything, but it can get crowded.

Layer-2 is like a fast train or sticky note system that takes work off layer-1 to make things quicker and cheaper. It still sends important updates to layer-1 to stay safe.

How They Talk: Layer-2 does the busy work off-chain, then sends summaries to layer-1, which checks and locks them into the permanent record.

Together, layer-1 and layer-2 make blockchains faster, cheaper, and able to handle tons of people using them for things like games, money, or digital art!