Initially, there were only one kind of blockchain networks where ledger storage and execution of transactions both happened on-chain. These blockchains were not scalable because of the topics and reasons mentioned in some of the previous episodes.
To achieve scalability and throughput, some solutions try to decouple or divide this work across on-chain and off-chain systems. Some solutions move the execution of tractions outside the chain while keeping the ledger state on the chain. Some other solutions delegate the work to smaller blockchains outside the main chain.
All the these solutions, broadly, come under the umbrella of layer 2 scalability solutions. The main chain where the ledger state and security comes from is the referred to as layer 1.
The basic concept is to scale layer 1 blockchains, we offload or delegate some of the execution to layer 2 solutions. The security comes from layer 1 while the scalability comes from layer 2.
For example, Ethereum and Bitcoin are layer 1 blockchains and plasma and lightning network are layer 2 solutions.
There is one more layer — layer 0. Layer 0 blockchains connect and secure layer 1 blockchains. This is more in terms of blockchain sharding. When we have multiple layer 1 blockchain shards and when we need to verify and connect them all, we use a layer 0 chain. An example of a layer 0 blockchain is Polkadot.
Episode 45 - Layer 1, Layer 2, and Scalability