![]() ![]() Top 10 Layer 1 blockchains by market capitalization: CryptocurrencyĬomparing Layer 1s: Bitcoin vs. We’ll explore each Layer 1 chain’s unique goals and characteristics in more detail later in the section. Other Layer 1 blockchains, such as Avalanche, are built more for interoperability with other chains. Solana and Algorand, for instance, leverage a Proof of History (PoH) and Proof of Stake (PoS) consensus mechanism respectively, as well as other blockchain construction tactics, to provide lower fees and faster transaction times. Many, if not most, of the smart contract-enabled Layer 1 blockchains developed since were created to address those problems. Ethereum was the first mainstream blockchain to incorporate smart contracts, and it hosted the first wave of dApps and tokens that ushered in DeFi and web3.īut, while Ethereum has become the most prominent blockchain for Layer 2 project development, its Proof of Work (PoW) mining system and high gas fees have proven an impediment to transaction speed and scalability within its DeFi ecosystem. ![]() However, its relatively simple structure limits what can be built on top of it. Bitcoin is designed to be a currency for simple, trustless transactions with enforced scarcity to preserve its value. However, there are also Layer 2 projects that don’t utilize smart contracts, such as Bitcoin’s Lightning Network, which is designed to facilitate faster and cheaper Bitcoin payments through transaction batching.ĭifferent Layer 1 blockchains are designed and optimized for different goals. Layer 2s can be new tokens, or more complex projects known as decentralized apps, or dApps. Layer 1s are tokens with their own blockchains, while Layer 2s are built on top of Layer 1 blockchains, usually through smart contract technology. Nearly all cryptocurrency tokens fall into one of two categories: Layer 1s and Layer 2s. This blog is a preview of our State of Web3 Report. ![]()
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