Understanding Blockchain Levels: Beyond Bitcoin

Part 2. Level 1 and Level 2 Blockchains Advantages and Disadvantages of Blockchain Technology Many perceive blockchain as synonymous with Bitcoin, which is a misconception. There are dozens of other networks, including Ethereum, Solana, BNB Chain, among others. These are different types of blockchains categorized by levels: Level 1 Blockchains: These are the foundational networks upon which other projects are built. Examples include Bitcoin, Ethereum, Solana, and BNB Smart Chain. They serve as the core ecosystem, providing operation, consensus, and security. All decentralized applications (dApps) and protocols are initially built on L1. Level 2 Blockchains: Developed on top of Level 1 blockchains, they aim to: • Speed up transactions • Reduce fees • Offload main network congestion Examples include Lightning Network (for Bitcoin), Arbitrum, Optimism, and zkSync (for Ethereum). Advantages of Blockchain: - Distribution: Data is stored across thousands of devices, ensuring resilience against failures. - Stability: Confirmed blocks are irreversible, making data alteration nearly impossible. - No middlemen: No need for banks or third parties; verification occurs via the network. Disadvantages of Blockchain: - Irreversibility: Changing data is difficult, often requiring creating a new chain. - Transparency: Transaction history is accessible to everyone, revealing activity at addresses. - Data growth: Blockchains continuously increase in size; Bitcoin has exceeded 800GB. - 51% attack: If malicious actors gain control over a majority of the network, they can rewrite transactions. In conclusion, L2 solutions address scalability issues. Blockchain embodies security and transparency but not without limitations. Final thoughts: Blockchain is not solely about finance. The technology is already utilized in voting systems, insurance, logistics, documentation, real estate, and more. Bitcoin is just one of many projects demonstrating the power of this technology.