¶ Layer 1 — Base Blockchains
Layer 1 (L1) chains are the primary ledgers where transactions are validated, ordered, and finalized. They define the consensus rules, state machine, data model, and security budget. Layer 2 networks and application protocols ultimately anchor to L1 for finality and dispute resolution.
¶ Overview
- Definition: The foundational blockchain that directly runs consensus and maintains canonical state (balances, smart contracts, UTXO sets).
- Role: Provides trust-minimized settlement, finality, and a shared execution environment (e.g., Bitcoin Script, EVM, Move).
- Scope: Fee markets, mempool rules, block formats, fork-choice, and protocol upgrades live here.
- Examples: Bitcoin, Ethereum, Monero, Tezos, Cardano, Solana.
TL;DR: L1 is the truth layer. Everything else (rollups, sidechains, app-chains) derives security or settlement guarantees from it—directly or indirectly.
¶ Core Responsibilities of Layer 1
¶ 1) Consensus & Finality
- Purpose: Decide which blocks count and when transactions are irreversible-enough to rely on.
- Mechanisms: PoW (Nakamoto), PoS (BFT-style or hybrid), variants like Snow/HotStuff/PBFT.
- Finality models:
- Probabilistic (Bitcoin) — confirmation depth reduces reorg risk.
- Economic/BFT (Ethereum post-merge, Tendermint) — safety via validator stakes and slashing.
¶ 2) Data & State Management
- Data availability: Blocks must be widely propagated and retrievable to validate state transitions.
- State models:
- UTXO (Bitcoin, Cardano’s EUTXO): simple, parallelizable checks.
- Account-based (Ethereum): global account/state tree; flexible, composable.
¶ 3) Execution Environment
- Script/VM: Rules for transaction validity and program execution (e.g., Script, EVM, WASM, Move).
- Determinism: Same input → same state transition on every honest node.
- Resource metering: Gas/weights limit DoS and price scarce blockspace.
¶ 4) Security Budget & Incentives
- Block rewards + fees secure the chain.
- Slashing / orphan risk aligns validator/miner behavior with protocol rules.
- Fee markets: EIP-1559–style base fee + tips, or auction-based models.
¶ Canonical Examples
| Chain | Consensus | State Model | Execution | Notes |
|---|---|---|---|---|
| Bitcoin | PoW (Nakamoto) | UTXO | Script (non-Turing) | Ultra-stable base money & settlement |
| Ethereum | PoS (Gasper/FFG) | Account | EVM (Turing-complete) | Smart-contract hub & L2 settlement |
| Monero | PoW (RandomX) | Account | Script-like VM | Privacy-first (ring sigs, stealth) |
| Tezos | PoS (Liquid BFT) | Account | Michelson | On-chain governance, formalism |
| Cardano | PoS (Ouroboros) | EUTXO | Plutus (Haskell-ish) | Deterministic, strong types |
| Solana | PoS (+ PoH) | Account | Sealevel VM | High throughput design |
¶ Diagram — Where Layer 1 Sits
Reading the diagram: L1 chains sit between L0 facilities (relay/interop/DA) and L2 systems (rollups/channels), providing canonical settlement and security.
¶ Design Choices That Shape an L1
¶ Consensus Design
- PoW: Energy-based Sybil resistance; simple but throughput-limited; mature threat model.
- PoS: Capital-based safety with slashing; energy-light; requires careful economics and liveness reasoning.
- Hybrids: BFT committees for fast finality layered over broader validator sets or checkpoints.
¶ Data Model & Execution
- UTXO vs Account: UTXO promotes parallel validation and simple coin ownership; Account model supports composability and smart contracts.
- VM & Language:
- Minimalist (Bitcoin Script) → smaller attack surface.
- General-purpose (EVM, WASM, Move) → rich apps but broader risk surface.
¶ Fee Markets
- Congestion pricing: EIP-1559 basefee or variable block sizes (e.g., Solana) vs capped blocks (Bitcoin).
- MEV management: Proposer-builder separation, auctions, in-protocol mitigations.
¶ State Growth & Pruning
- State rent, pruning, snapshots, stateless clients, Verkle tries — all to keep validation accessible.
¶ Upgradeability & Governance
- Hard/soft forks, on-chain vs social-layer governance.
- Backward compatibility vs agility.
¶ Security Considerations
- Reorgs & Finality: Deep reorgs rare on healthy chains but non-zero; economic finality counters long-range attacks in PoS.
- DoS & Resource Bounds: Gas/weights, mempool policies, and peer bans protect nodes.
- Cryptography: Curve choices, signature schemes, and ZK systems must be audited and versioned.
- MEV & Censorship: Inclusion/exclusion games; relay dependence; decentralizing block building is active research.
¶ Relationship to Layer 0 and Layer 2
- L0 → L1: L0 can provide validator coordination, interop, or data availability that multiple L1s consume.
- L1 → L2: L2s inherit settlement security from L1; fraud/validity proofs ultimately land on L1.
- Bridges: Native messaging (IBC/XCM) beats ad-hoc bridges in security assumptions, but requires protocol alignment.
¶ Best Practices for Users
- Confirmations & Finality: Wait an appropriate number of confirmations or checkpoint finality before large transfers.
- Key Management: Prefer hardware wallets; back up seed phrases; consider multisig/threshold where supported.
- Fee Awareness: Understand base fee vs tip; time-sensitive transactions may need higher priority.
- Client Diversity: Use multiple client implementations where ecosystems support them.
¶ Best Practices for Builders
- Deterministic Contracts: Avoid non-determinism; keep execution predictable across nodes.
- Audit & Monitoring: Formal verification where possible; runtime monitors for invariants and event anomalies.
- Upgradability Discipline: Minimize admin keys; timelock upgrades; disclose risks clearly.
- Data Minimization: Emit only necessary events/logs; be mindful of state bloat.
¶ Common Pitfalls
- Assuming instant finality on probabilistic chains.
- Relying on centralized RPCs without redundancy or verification.
- Ignoring MEV in protocol/economic design.
- Underestimating state growth and node requirements.
¶ Further Reading / References
- Bitcoin: A Peer-to-Peer Electronic Cash System — S. Nakamoto
- Ethereum Yellow Paper — G. Wood
- Tendermint: Consensus without Mining — J. Kwon
- MEV and PBS Research (assorted academic & ecosystem reports)