What is the difference between L1 and L2?
Back in times, there was one and only Ethereum network — the father of Turing complete blockchain (aka the network that supports smart contracts). It became a role model and was the go to option for projects and platforms. As the usage grew, so did the network fees.
Transaction costs can be quite high at times, making it unfeasible for many people to use it. Because of this, the Ethereum ecosystem has started to create additional layers that are compatible with Ethereum and support its load. People call them differently: L2s or Sidechains. But there is a difference between L1 and L2 types of networks.
Layer 1’s vs Layer 2’s
In the decentralized world, a Layer 1 network refers to a blockchain such as Bitcoin, Ethereum, etc. At the same time, a Layer 2 protocol is a third-party integration added on top of a Layer 1 blockchain to make it more efficient and scalable. Even though the L1 solutions were made to decentralize P2P transactions, they ultimately failed to solve the trilemma problem, and here’s where the L2 solutions come into the picture.
The main difference between these two is that L1 solutions are more secure and prefer to keep the network decentralized. On the other hand, L2 remains focused on confirmation time, transaction speed, and lower gas fees by handling all the burdens of the main blockchain. Since it is a third-party integration, it comes with a slight trade-off in terms of L1 security and decentralization.
Sidechains vs Layer 2’s
A sidechain is a totally distinct and separate blockchain that is compatible with Ethereum. It uses a different consensus mechanism than Ethereum and has its own security measures. Sidechains also tend to be more centralized than Ethereum. Assets can be moved back and forth between a Sidechain and Ethereum using a “bridge”. Polygon is an example of a Sidechain, though it’s moving towards becoming an L1.
Layer 2 networks on the other hand are not separate blockchains. Instead, they combine large quantities of transactions off-chain (off of the Ethereum blockchain) before then submitting them bundled together on-chain, thus relying upon the same security and consensus mechanism as Ethereum.
Optimism and Arbitrum are examples of Layer 2 networks. For example, Optimism is called an “optimistic rollup” because it “assumes the best” and defaults to submitting the minimum amount of information required with each bundle of transactions. In the case of fraud or dispute, additional information and documentation are then provided.
Which is better?
Every network is different, and each comes with its own set of strengths and weaknesses. There isn’t a single solution that can do everything, so you may find yourself wanting to use multiple networks depending on what you’re trying to do. For example, if you’re wanting to distribute a lot of NFTs to many different people, it might make sense to use a Sidechain like Polygon. If you like Ethereum because you trust its consensus mechanism and security, then Layer 2 networks might appeal to you more than a Sidechain because they are tied more closely to Ethereum.