On Binance, Layer 1 and Layer 2 refer to different levels of blockchain infrastructure, specifically with regard to cryptocurrencies and their applications. Here’s a simplified explanation of each:
Layer 1:
Definition: It is the basic blockchain on which the cryptocurrency operates. The first layer is considered the foundation on which everything is built, such as Bitcoin or Ethereum.
Its tasks:
Transaction processing.
Network security.
Store data on the chain.
Its challenges:
It often suffers from scalability issues due to limited transaction speed and high fees when congested.
Examples:
Bitcoin
Ethereum.
Binance Smart Chain.
Layer 2:
Definition: These are solutions built on top of the first layer to improve its performance, especially in the areas of transaction speed and cost reduction. These solutions rely on the first layer for security but move part of the operations off-chain to ease the burden.
Its tasks:
Improve scalability.
Speed up transactions.
Reduce transaction fees.
Examples:
Bitcoin Lightning Network.
Polygon for Ethereum.
Optimism and Arbitrum as Layer 2 solutions for Ethereum.
The main difference between layer 1 and layer 2:
Layer 1Layer 2Basic blockchain. Solutions built on top of layer 1. Provide security and decentralization. Improve speed and reduce costs. On-chain transactions. Mostly off-chain transactions.
How does Binance use the two layers?
Binance supports both layer 1 coins (such as BTC, ETH) and layer 2 solutions (such as MATIC for Polygon Network).
Allows users to withdraw and deposit currencies across different networks, including layer 2 networks to save fees.
In short, Layer 1 is the foundation, while Layer 2 is the solutions that enhance its performance.
