What is a Layer 1 blockchain?
A Layer 1 (L1) blockchain is the base protocol of a blockchain network — the layer that processes transactions, reaches consensus, and stores the definitive record of all on-chain activity. Everything built on top of a blockchain, from smart contracts to stablecoins to decentralized exchanges, ultimately settles on a Layer 1.
Well-known Layer 1 blockchains include Bitcoin, Ethereum, Solana, BNB Chain, Cardano, and Avalanche. Each operates independently, with its own rules, consensus mechanism, and native token used to pay transaction fees.
What a Layer 1 does
A Layer 1 blockchain is responsible for four core functions:
- Consensus: Determining how the network agrees on which transactions are valid and in what order they occurred. The two dominant mechanisms are Proof of Work (PoW), used by Bitcoin, and Proof of Stake (PoS), used by Ethereum, Solana, and most modern L1s
- Transaction processing: Validating and executing transactions, including token transfers and smart contract interactions
- Data storage: Maintaining a complete, immutable record of all transactions across a distributed network of nodes
- Native token: Each L1 has a native cryptocurrency used to pay gas fees and incentivize validators or miners. Bitcoin uses BTC, Ethereum uses ETH, Solana uses SOL
The blockchain trilemma
Every Layer 1 blockchain faces a fundamental design constraint known as the blockchain trilemma, a concept introduced by Ethereum co-founder Vitalik Buterin. It states that a blockchain can only optimize for two of the following three properties at once:
- Security: Resistance to attacks and manipulation
- Decentralization: No single entity controls the network
- Scalability: The ability to process a high volume of transactions quickly and cheaply
Bitcoin and Ethereum prioritize security and decentralization at the expense of scalability. Bitcoin processes around 7 transactions per second (TPS). Ethereum processes around 15 to 30 TPS at the base layer. Visa, by comparison, processes over 1,700 TPS. Solana trades some decentralization for much higher throughput, processing thousands of TPS under normal conditions.
This tradeoff is why Layer 2 solutions exist: rather than modifying the L1 itself, developers build scaling layers on top that inherit the L1's security while handling more transactions off the base chain.
Major Layer 1 blockchains
- Bitcoin (BTC): The first blockchain, launched in 2009. Designed for peer-to-peer value transfer using Proof of Work. Prioritizes security and decentralization. Not programmable in the way Ethereum is, and processes around 7 TPS.
- Ethereum (ETH): The dominant programmable blockchain, launched in 2015. Home to most stablecoins, DeFi protocols, and NFTs. Switched from Proof of Work to Proof of Stake in September 2022 (the Merge), cutting energy consumption by approximately 99.95%. The Ethereum Virtual Machine (EVM) is the execution environment for smart contracts, and EVM compatibility has become a standard that many other L1s and L2s adopt.
- Solana (SOL): Designed for high throughput, processing thousands of TPS with sub-second finality and very low fees. Uses a combination of Proof of Stake and Proof of History. Increasingly used for stablecoin transfers and payment applications due to its speed and cost profile.
- BNB Chain: Operated by Binance, EVM-compatible, and optimized for lower fees than Ethereum mainnet. Widely used for DEX activity and CEX integrations.
- XRP Ledger: Designed specifically for cross-border payments and settlement. Uses a consensus protocol rather than PoW or PoS, enabling fast finality of 3-5 seconds and very low fees.
Layer 1 and stablecoin payments
The choice of Layer 1 has direct implications for stablecoin payment infrastructure. USDC and USDT are issued natively on multiple L1s, and the same dollar-pegged token behaves differently depending on which chain it lives on.
- Settlement speed: A USDC transfer on Solana settles in under a second. The same transfer on Ethereum mainnet may take 12-15 seconds for block confirmation
- Transaction cost: Gas fees on Ethereum mainnet vary with network demand and can range from cents to tens of dollars. Solana fees are fractions of a cent
- Liquidity: Ethereum has the deepest stablecoin liquidity. Moving large amounts on thinner L1s may face slippage
Stablecoin orchestration platforms handle the complexity of routing payments across different L1s, selecting the optimal chain for each transaction based on cost, speed, and liquidity at that moment.
Layer 1 vs. Layer 2
A Layer 2 is a separate network built on top of a Layer 1 that processes transactions off the base chain and periodically settles back to it. Layer 2 solutions inherit the security of their underlying L1 while handling more transactions at lower cost.
The distinction matters for payments: a transaction that settles on a Layer 2 is ultimately backed by the security of the Layer 1 beneath it, but the speed and cost profile reflects the L2, not the L1.
