How do blockchain layers work? Are they necessary?
Blockchain layers start with the foundational layer: Layer 0. Layer 1 is built on top of Layer 0, Layer 2 is built on top of Layer 1, and so on. As mentioned earlier, blockchain layers work as an ecosystem. Each layer is designed to support and enhance the function of the one below it.
Layers were built to solve some of the key challenges blockchains face. One of the most prominent challenges is that some blockchains may be impractical for daily use due to their complexity.
For example, one complaint about Bitcoin is that the settlement time for each transaction on the blockchain can be slow. Also, the fees that it charges for each transaction can be significant, which means it may not make sense to pay for small, everyday items with bitcoin.
To address these issues, crypto developers created the Lightning Network, a Layer 2 network built on the Bitcoin blockchain. The Lightning Network keeps track of bitcoin transactions on a separate, faster, and more efficient ledger, and then transposes these records over to the Bitcoin blockchain in batches. This allows users to transact in bitcoin with lower settlement times and fees.
In addition to making blockchains more practical, layers are also used to tackle interoperability issues. Interoperability refers to how different blockchains send each other information. For example, you and your friend may have smartphones made by different manufacturers, but you can still send and receive texts from each other. Layers can make it possible for this same function to exist between different blockchains.
Finally, layers can also enhance the crypto industry by allowing developers to optimize their area of expertise. In the smartphone analogy above, the app developers don’t have to worry about manufacturing the hardware, and vice versa. Instead, they can each focus on what they do best. In the same way, layers enable niches of the crypto industry to create the best products they can.