L1 and L2 (web3) explained for newbies.

Before we dive into the key metrics of L1 and L2 in crypto, just a quick intro about me. I'm a young male Zimbabwean. Started my journey in web3 just a few months ago in 2023 and what I have learned so far is crypto projects require significant upfront work. Luckily I had an opportunity to learn research and analytics from the best (Covalent). Covalent network offers a decentralized means of assessing web 3 data from testnet project to mainnet, pulling data directly to your database and so many easy to understand functionality. Lets dive in :

In the context of web3, L1 and L2 refer to different layers or protocols that are used to build decentralized applications (dApps) and enable blockchain functionality. Let's break down L1 and L2 and explain their roles:

1. Layer 1 (L1): Layer 1 refers to the base layer of a blockchain network. It is the underlying blockchain protocol and typically includes the main network and its native cryptocurrency. Examples of Layer 1 blockchains include Ethereum, Bitcoin, and Cardano. Layer 1 blockchains provide the foundation for decentralized applications and store the definitive version of the blockchain ledger. They handle consensus mechanisms, transaction processing, and security.

Ethereum, for instance, is a Layer 1 blockchain that provides a decentralized platform for executing smart contracts. Developers can write and deploy smart contracts on the Ethereum network, which is secured by the Ethereum blockchain's consensus algorithm (currently transitioning from proof of work to proof of stake). The Ethereum network's native cryptocurrency is Ether (ETH).

1. Layer 2 (L2):Layer 2 refers to protocols or solutions built on top of Layer 1 blockchains to enhance scalability, improve transaction throughput, and reduce costs. Layer 2 solutions are often used to address the scalability limitations and high fees associated with Layer 1 blockchains.

There are various Layer 2 solutions available, including sidechains, state channels, and rollups. These solutions enable off-chain processing of transactions or computation, while still leveraging the security and decentralization of the Layer 1 blockchain.
For example, Ethereum has several Layer 2 solutions, such as Optimistic Rollups and zkRollups. These solutions allow for the aggregation of multiple transactions into a single batch, reducing the number of on-chain transactions and increasing the throughput of the network. Layer 2 solutions can also provide faster transaction confirmations and lower fees compared to Layer 1.
In summary, Layer 1 (L1) refers to the base blockchain protocol, while Layer 2 (L2) represents solutions built on top of Layer 1 to enhance scalability and reduce costs. L2 solutions leverage the security and decentralization of L1 blockchains while providing improved performance for decentralized applications.