Understanding Blockchain Layered Architecture: A Complete Guide from the Base Layer to the Extension Layer

Blockchain technology is reshaping the way digital transactions are conducted. When discussing its core capabilities, two concepts frequently appear: blockchain layers explained—Layer 1 (the base network) and Layer 2 (the secondary network). But what exactly are these two? How do they work together? What do they mean for crypto users?

Why Understand Blockchain Layering?

First, we need to acknowledge a reality: mainstream blockchains like Bitcoin and Ethereum face an awkward dilemma—they cannot achieve three goals simultaneously. This is the famous “Blockchain Trilemma.”

According to Ethereum founder Vitalik Buterin’s theory, any blockchain struggles to balance the following three points perfectly:

• Decentralization: The network is maintained by numerous independent nodes
• Security: Transactions cannot be tampered with or reversed
• Scalability: The network can handle a large volume of transactions

To overcome this bottleneck, developers devised a layered architecture: building additional processing layers outside the main chain. This is where Layer 1 and Layer 2 come from.

Layer 1 (The Base Network): The Foundation of Infrastructure

Layer 1 is the blockchain itself—major networks like Bitcoin, Ethereum, Cardano all belong to this layer. They are fully autonomous systems with their own consensus mechanisms, validation processes, and tokens.

What are the ways to scale Layer 1?

Sharding Technology Sharding divides the entire blockchain network into multiple sub-networks (shards), each processing transactions independently. Imagine splitting a bank’s operations into multiple branches instead of all transactions going through headquarters. This allows parallel processing of more transactions.

Consensus Mechanism Upgrades Switching from Proof of Work (PoW) to Proof of Stake (PoS) is a key upgrade. PoW requires extensive computational resources for mining and transaction validation, while PoS allows token holders to validate transactions directly, increasing efficiency and reducing energy consumption. Ethereum’s upgrade (The Merge) exemplifies this transition.

SegWit (Segregated Witness) Taking Bitcoin as an example, SegWit separates transaction signatures from transaction data to enable scaling. A 1MB Bitcoin block could originally contain about 2,000 transactions; with SegWit, it can handle around 4,000, doubling space utilization.

Advantages of Layer 1 Scaling

✓ No need for additional chains or bridging mechanisms
✓ Higher security (all transactions are finally confirmed on the main chain)
✓ Lower long-term transaction fees
✓ Maintains full decentralization

Limitations of Layer 1 Scaling

✗ Requires hard or soft forks, community consensus is difficult
✗ Increasing storage and bandwidth demands on individual nodes
✗ Cross-shard transactions still face latency issues
✗ Miner/validator income may decline, reducing incentives

Layer 2 (Secondary Networks): Innovation on Top of the Main Chain

Compared to modifying the main chain itself, Layer 2 adopts a different approach—processing transactions off-chain while inheriting the security of the main chain.

This scheme is similar to Alipay’s existence: not reforming the central bank system, but building an efficient payment intermediary on top of it.

Main Forms of Layer 2

Rollups Currently the most popular Layer 2 solution. Rollups execute thousands of transactions off-chain, then “compress” the results and submit them to the main chain. The main chain only needs to verify these compressed proofs, greatly reducing computational load.

Based on verification method, they are divided into:

• Optimistic Rollups: assume transactions are valid unless challenged
• ZK Rollups: use cryptographic proofs to directly verify transaction validity

Arbitrum and Optimism are the largest Optimistic Rollups projects on Ethereum.

State Channels Two users open a “channel” and conduct hundreds of transactions off-chain, only submitting the final result to the main chain. Bitcoin’s Lightning Network is a prime example of this scheme.

Lightning Network can now handle real-time, micro-payment Bitcoin transactions, reducing fees from several dollars to a few cents.

Sidechains Sidechains are independent blockchains running in parallel with the main chain, connected via a two-way peg (often called a “bridge”). Sidechains have their own consensus mechanisms and validators, so they are less decentralized than Layer 2 but more flexible.

Polygon is the most successful Ethereum sidechain. It has accumulated over $1.3 billion in total value locked (TVL) in DeFi, supporting protocols like Aave, Compound, and dozens of others.

What Layer 2 Changes Bring

✓ Transaction speeds increase by 100-1000 times
✓ Transaction fees decrease by over 90%
✓ Deployments without modifying the main chain, immediate rollout
✓ User experience comparable to traditional internet applications

Challenges Facing Layer 2

✗ Liquidity is dispersed across multiple Layer 2 networks
✗ Limited interoperability between applications (difficult cross-Layer 2 transfers)
✗ Users need to manage multiple wallets and private keys
✗ Moving back from Layer 2 to the main chain requires waiting time (usually hours)

Layer 1 vs Layer 2: Which Should I Choose?

This is not an “either/or” question but a complementary relationship.

Ethereum 2.0’s launch has not made Layer 2 obsolete—in fact, it has strengthened their importance. Even if the main chain’s throughput reaches 100,000 transactions per second, Layer 2 can still offer lower fees and faster confirmation speeds.

Practical Application Scenarios

Payments and Transfers Lightning Network has been integrated into applications like Strike and Nostr, reducing cross-border remittance costs from 10% to less than 1%. OpenNode enables retailers to accept Bitcoin payments directly.

DeFi Trading Uniswap on Polygon can swap tokens at nearly zero cost, whereas on Ethereum mainnet, such transactions cost $20–$100. This has driven explosive growth in the Polygon ecosystem.

Gaming and NFTs Polygon Studios focuses on migrating games onto blockchain. With extremely low transaction fees, in-game NFT trading becomes feasible. Players can buy and sell assets frequently without worrying about fees eating into profits.

Microtransactions Previously unfeasible due to high costs, scenarios like paying for music streaming or tipping content creators are now possible.

Future Development Directions

The future of blockchain scaling is not about a single solution winning but multi-layer collaboration:

• Distributed Validation: Multiple Layer 2s process in parallel, with the main chain periodically settling and finalizing
• Cross-chain Interoperability: Different Layer 2s can interact directly without returning to the main chain
• Hybrid Architectures: Smart selection of processing layers based on transaction characteristics (small transactions on Layer 2, large ones on Layer 1)

Ethereum 2.0’s upcoming Proto-Danksharding exemplifies this approach—it will significantly reduce the cost of submitting data to the main chain for Layer 2, further enhancing Layer 2 competitiveness.

Summary

blockchain layers explained embodies a modern design philosophy: not striving for everything on a single blockchain but building a multi-layer ecosystem. Layer 1 provides a secure infrastructure, while Layer 2 offers high-efficiency transaction experiences. This layered architecture is becoming the standard for all high-performance blockchains.

For users, understanding this means:

• Store large assets long-term on Layer 1 (e.g., mainnet Ethereum, Bitcoin)
• Use Layer 2 for daily transactions and small payments (e.g., Arbitrum, Polygon)
• When transferring between networks, consider time and costs

Blockchain is evolving from a “universal public chain” to a “layered ecosystem.” Mastering this concept is key to truly navigating the future of crypto asset management.