Those who spend time in the cryptocurrency ecosystem are familiar with the concepts of Layer-1 and Layer-2. Layer-1 and Layer-2 coins, which aim to address scalability problems in blockchain, are attracting attention.
One of the solutions applied to overcome the scalability problem with the increase of the latency problem in the networks is Layer 1 solutions. Blockchain scalability means raising the speed and processing power of the network. Scaling can refer to an increase in the number of transactions per second. Layer 1 Blockchain is a solution that improves the protocol itself without making any changes to the network to make the overall system more scalable. Two popular approaches in this solution are consensus exchange and sharding.
Consensus, Proof-of-Work (PoW) is a traditional mining-based consensus mechanism used in some popular cryptocurrencies, especially Bitcoin. Sharding is a method taken from databases and adapted to Layer 1 solutions. It occurs by dividing a network into a series of separate database blocks known as "shards".
Examples of Layer-1 coins are Solana (SOL), Cardano (ADA), Polkadot (DOT), Terra (LUNA), Avalanche (AVAX), Algorand (ALGO), Tron (TRX), Phantom (FTM), Elrond ( EGLD) and Kadena (KDA) can be issued. Among those who draw attention to these altcoins are names such as Clayton Gardner, CEO of crypto investment management firm Titan, Wave Financial CEO Matteo Perruccio, and former Citigroup executive Matt Zhang.
Layer-2 is an overlapping network on top of the blockchain. It adds on top of the main structure but does not change the structure of the network. These are called layer-2 solutions. For example, Bitcoin is a Layer-1 network; Lightning Network is a Layer-2 network.
Some of the Layer 2 crypto money projects are; Polygon (MATIC), Loopring (LRC), Immutable X (IMX), OMG Network (OMG), 0x (ZRX), Celer Network (CELR), Bancor (BNT), Perpetual Protocol (PERP), DeversiFi (DVF), ZKSwap (ZKS).
Scalability is the biggest reason inhibiting the mainstream adoption of cryptocurrencies. To make sure that cryptocurrencies are scalable and fast enough for day-to-day transactions, we need protocols that have been built specifically to solve this problem. This is why projects like Algorand are critical, and we can only hope that other projects follow suit and provide a viable solution.