A layer 1 blockchain is an independent, standalone blockchain in the vein of Bitcoin, Etherem or Solana. All of these face the blockchain trilemma, that a blockchain can only effectively deliver 2 of 3 qualities: security, decentralisation and scalability. Most early blockchains, such as Bitcoin and Ethereum, value security and decentralisation over scalability. More recent blockchains like Solana sacrifice decentralisation for scalability. The new, faster L1 blockchains that sacrifice decentralisation for speed will have their work cut out for them to compete against L1 heavyweights Bitcoin and Ethereum, however, because a new breed of so-called layer 2 blockchains have emerged to vastly increase their scalability and speed. A layer 2 blockchain acts in conjunction with a layer 1 chain by allowing transactions to take place much more cheaply and quickly on the layer 2, with an update to the underlying L1 happening at some time in future. The L1 becomes a sort of slow, expensive but incredibly reliable settlement layer, with the L2 providing the speed and low expense required of a blockchain fit for consumers. With Ethereum fees regularly hitting new highs and L2 solutions beginning to hit their stride, the stage has been set for Arbitrum, Optimism and other L2 solutions to take off in 2022. Rumours abound that these L2 solutions will be offering their own tokens to help support their development and let investors gain exposure to them. Layer 2 Blockchains Bus i ne s s & Economy 22 Finance Monthly.
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