Maybe you're looking to dip your toes into defi (decentralised finance) but are currently struggling to wrap your head around the concepts on the blockchains. If so, read on! Disclaimer that the below are very basic info, and are meant for beginners in crypto.
In a very basic definition, L1 is the initial layer of blockchain, and L2 is built "on top" of a L1 blockchain. What's a blockchain...? You can think of it as an environment where the protocols, smart contracts etc. are being carried out in.
Key differentiators (not limited to the below) between the chains are:
- Consensus algorithm - whether it's based on PoW (proof-of-work, which is commonly known to require more intensive energy consumption), or PoS (proof-of-stake)
- TPS (transaction per second)/throughput - an indicator on how fast transactions are processed
- Gas fee - how much does it cost to perform transactions on the blockchain
- Scalability - how easy it is for the blockchain to scale up to adapt to higher volume
Below are the top 10 blockchains currently:
Extract from https://defillama.com/chains
- Ethereum (L1) - top blockchain, commanding the highest gas fees. Despite so, it is still the most popular
- Binance (L1) - a cheaper alternative based off Binance Smart Chain
- Solana (L1) - a newer blockchain that came to prominence (I defined this as gained popularity/blockchain coin has a significant growth) just this year. At 3rd place, it's pretty much standing as the "best of the rest" at this point. It's still too early to conclude if it can remain here given the fast growth in other blockchains.
- Terra (L1) - another blockchain that came to prominence just this year. A prominent association to this blockchain is the minting of UST (a stablecoin tagged to the native coin, Luna)
- Avalanche (L1) - yet another blockchain that came to prominence just this year. Fans of Avalanche has been boasting of the fastest transaction speed (you will have to find out yourself how true this it).
- Tron (L1) - unfortunately I'm not very familiar with this. But I often come across news of USDT (Tether USD) and Tron together - example: https://cryptocurrencynewsroom.com/tether-spends-an-additional-1-billion-usdt-on-the-tron-network/
- Fantom (L1) - yet another blockchain that came to prominence just this year
- Polygon (L2, based off Ethereum) - our first L2 from the list. Polygon seeks to lower gas fees (amongst offering other benefits) while leveraging on the security Ethereum has to offer
- Arbitrum (L2, based off Ethereum) - second L2 from the list. You may ask, what's the difference between Polygon and Arbitrum? Please see: https://www.exodus.com/blog/how-is-arbitrum-different-from-polygon/#head2
- Waves (L1) - unfortunately, not familiar with this chain as well. For more info: https://101blockchains.com/what-is-waves-blockchain/
Hope the above provides some context on what blockchains are, and also shedding some light on the more popular blockchains currently available.
Additional resources for your reference:
https://dailycoin.com/l1-and-l2-battle-for-defi-dominance/
https://ambcrypto.com/heres-where-ethereum-stands-amidst-the-growing-l1-l2-competition/
Disclaimer: above are my own findings, and may or may not be inaccurate. Please do your own research to build your very own understanding of the world of crypto. I do welcome any corrections if there's something factually incorrect - thanks in advance for sharing your knowledge!
Image credit: Google Image
