Layer 1 blockchains: what they are and how they work
A layer 1 blockchain is the base network that settles crypto transactions without a central operator, using consensus rules to agree on each block.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
The term shows up in crypto news about tokens and the networks behind them. Not every chain uses the same design, and how decentralized a chain is varies.
What Is a Layer 1 Blockchain?
A layer 1 is the base chain of a crypto network. It records and settles transactions without a company or central server in charge. A shared ledger keeps adding blocks, and each block links to the one before it.
How Does a Layer 1 Work?
A layer 1 runs on a peer-to-peer network of computers called nodes. Nodes follow a consensus algorithm to add and validate blocks. Proof of work and proof of stake are two common rules.
- Nodes share and check each transaction.
- A consensus rule sets the order of blocks.
- Each block holds transaction data, a timestamp, and a hash of the block before it.
- Miners or validators do the work the rules require.
How Do People Use Layer 1s?
Each major layer 1 has its own native token. Bitcoin launched in 2009, Ethereum in 2015, and Solana in 2020. The token is the unit of value people use across the network.
What Limits Do Layer 1s Have?
A layer 1 can slow down when many people use it at once. Fees can rise when the network is congested, because block space is limited. Speed and cost depend on the design of the chain and on demand.
How Is Layer 1 Different From Layer 2?
A layer 2 is a network that sits on top of a layer 1.
Frequently asked questions
Ethereum is a layer 1. It moved to proof of stake in 2022, and layer 2 networks settle back to it.
No. Each chain sets its own rules, and proof of work and proof of stake are two common types.
The token may not arrive where you meant it to go, and recovery can be hard or impossible. Check the network before you send.
In the US, the IRS treats crypto as property, so layer 1 tokens usually follow the same rules as other crypto.
