Layer 1 vs layer 2 blockchains: what is the difference?

What is a layer 1 blockchain?

A layer 1 is a blockchain that stands on its own. It has its own network of computers (nodes), its own rules for agreeing on the order of transactions (its consensus mechanism) and its own native coin to pay fees. Bitcoin, Ethereum and Solana are all layer 1s. When a transaction is final on a layer 1, there is no higher authority to appeal to: the chain itself is the record.

That independence is expensive. Every full node checks every transaction, so the chain can only handle as much activity as ordinary nodes can keep up with. The Bank for International Settlements noted in 2022 that this limit worked out at about 30 transactions per second on Ethereum, against around 1,700 per second on average for Visa. When demand exceeds that capacity, users bid against each other and fees rise.

Changing the base layer to fit more transactions is hard. ethereum.org explains that bigger blocks would require larger nodes and specialised hardware, which would shrink the number of people able to run one. Our guide to the blockchain trilemma explains why speed, security and decentralisation pull against each other.

What is a layer 2, and how does it connect to the base chain?

A layer 2 moves the work off the base chain but keeps the base chain as the court of final appeal. In ethereum.org's definition, layer 2 solutions handle transactions away from Ethereum Mainnet (layer 1) while relying on Mainnet's decentralised security model.

The connection is the important part. A layer 2 typically runs a smart contract on the layer 1 that holds users' deposits and accepts updates. It then sends the base chain either the raw transaction data, a cryptographic proof, or both. If something goes wrong on the layer 2, the contract on layer 1 is where disputes are settled and where users can, in principle, withdraw their funds.

1. Deposit. You lock coins in the layer 2's contract on the base chain.

2. Transact. You trade or pay on the layer 2, where an operator orders transactions quickly and cheaply.

3. Batch. The operator bundles many transactions and posts the data or a proof to layer 1.

4. Settle or exit. Layer 1 accepts the result; you can withdraw back to the base chain, sometimes after a waiting period.

How do layer 1 and layer 2 compare side by side?

Ethereum has made rollups the centre of its scaling plan. Its March 2024 Dencun upgrade added a cheaper data format, called blobs, designed specifically for rollups, which we explain in Ethereum rollups explained.

What kinds of layer 2 exist?

Rollups run transactions off-chain and post the transaction data to Ethereum. Optimistic rollups assume batches are valid unless someone proves fraud during a challenge window; zero-knowledge rollups attach a validity proof that Ethereum checks directly.

Payment channels let two parties exchange many signed updates privately and touch the base chain only to open and close. The Bitcoin Lightning Network links many such channels into a network, as described in its 2016 whitepaper.

Sidechains are often marketed alongside layer 2s, but they are different. ethereum.org describes a sidechain as a separate blockchain with its own consensus, linked by a two-way bridge, that does not post its data back to Ethereum — so it does not inherit Ethereum's security. If its validators misbehave, Ethereum cannot overrule them.

Is a layer 2 as safe as the layer 1 beneath it?

Not automatically. A well-built rollup can let you recover funds through the base chain even if its operator disappears, but you are also trusting extra software: the layer 2's contracts, its proof or dispute system, and often an upgrade key held by its developers. ethereum.org says plainly that layer 2 safety depends on the underlying technology, smart-contract security and the maturity of the network.

Moving money between layers adds its own risk. Bridges hold large pools of locked coins and have been frequent targets for hackers; see cross-chain bridges explained. Lightning users face a different duty: the whitepaper warns that participants must watch the blockchain so that a counterparty cannot close a channel using an out-of-date balance.

What mistakes do beginners make with layer 1s and layer 2s?

• Calling every cheap chain a layer 2. Sidechains and independent layer 1s are not secured by Ethereum, whatever their branding.
• Sending to the wrong network. The same wallet address can exist on Ethereum and several layer 2s. Coins sent on a network the recipient does not support may not arrive; read what EVM-compatible means before you move funds.
• Forgetting the exit time. Withdrawing from an optimistic rollup straight to Ethereum takes about a week by design.
• Leaving no coin for fees. Each layer charges its own fees, so keep a small balance for fees on the network you are actually using.