Layer 1
The base blockchain network that provides the foundational infrastructure — consensus, security, and data availability — upon which applications and Layer 2 solutions are built. Layer 1 blockchains process and finalize transactions on their own mainnet and have their own native cryptocurrency for gas fees.
“Ethereum, Bitcoin, Solana, Avalanche, and Cardano are all Layer 1 blockchains. Each has its own consensus mechanism, native token, and independent validator set.”
Layer 2
A secondary protocol built on top of a Layer 1 blockchain to improve scalability, reduce transaction costs, and increase throughput without sacrificing the security guarantees of the underlying chain. Layer 2 solutions process transactions off the main chain and periodically post compressed proofs or data back to Layer 1 for finality.
Blockchain
A distributed, append-only digital ledger that records transactions across a network of computers in a way that makes it cryptographically secured and practically impossible to alter historical records. Each block contains transaction data and is linked to the previous block through a cryptographic hash, forming an immutable chain.
Consensus Mechanism
The method by which a decentralized blockchain network reaches agreement on the current state of the ledger and which transactions are valid. Consensus mechanisms solve the problem of coordinating untrusting parties without a central authority. Major types include Proof of Work, Proof of Stake, Delegated Proof of Stake, and Proof of Authority.
Scalability
A blockchain's ability to handle increasing transaction volume without degrading performance, increasing fees, or sacrificing decentralization and security. The 'scalability trilemma' (coined by Vitalik Buterin) posits that blockchains can only optimize two of three properties: decentralization, security, and scalability. Layer 2 solutions, sharding, and alternative consensus mechanisms are approaches to improving scalability.