Layer-1 Solutions and How They Contribute to the Blockchain’s Evolution

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As a researcher who has been closely following the evolution of blockchain technology since its inception, I can confidently say that we are witnessing an unprecedented transformation in the finance industry. The emergence of Layer-1 solutions is not just a game-changer; it’s a revolution that promises to reshape the very architecture of the Internet itself.

Abigail Johnson, CEO of Fidelity Investments, predicted in 2017 that blockchain technology would not just improve how securities are settled, but would also significantly alter market structures and potentially redesign the Internet itself. Today, as we witness this transformation unfold in the finance industry, I am grateful for the alternative method of financial transactions blockchain has provided. However, it’s important to note that this technology has faced its fair share of hurdles, such as scalability issues, difficulties in making it accessible to users, and limitations within its infrastructure.

As an analyst, I’m here to shed light on why the emergence of groundbreaking Layer-1 solutions couldn’t have come at a better time. You see, we’re no longer grappling with many of the hurdles that once hindered the blockchain landscape during its infancy. In this article, let’s delve into a few of these Layer-1 innovations and explore how they’ve contributed to the industry’s ongoing development.

The Blockchain Trilemma

The term “blockchain trilemma” was introduced by Ethereum co-founder Vitalik Buterin. It signifies a predicament that blockchain technology faces concerning three key elements: scalability, security, and decentralization. In essence, Vitalik’s argument is that it’s impossible for a blockchain system to have all three properties simultaneously; they can only possess two at any given time. Some projects opt to align with this perspective by concentrating on just two aspects of the trilemma. On the other hand, some developers are working diligently to address the trilemma directly through groundbreaking innovations.

A creative method for resolving the trilemma is known as Sharding, which is a technique for enhancing scalability within blockchain networks. By dividing a blockchain network into smaller segments called “shards,” each shard can handle its own data and process more transactions per second (TPS). Other potential solutions being investigated include Side Chains and state channels. Side chains are separate blockchains that operate independently from the main chain, taking on specific tasks to lessen the burden on the primary chain. State channels enable transactions to occur off-chain, with only the final state of the transactions being recorded on the main chain.

Evolution of Layer-1 Blockchain Architecture

The structure or design of a blockchain system consists of various parts (often referred to as layers). Each part within this system plays a distinct role, ranging from data storage to ensuring agreement among the system. These parts collectively form what we call a blockchain, and there are four main types of blockchains.

  • Public blockchain 
  • Private blockchain 
  • Hybrid blockchain 
  • Consortium blockchain 

Among this group, public blockchain networks experience the most scalability challenges due to their extensive user bases, making them available to anyone with an internet connection. Notable examples include Bitcoin and Ethereum. Despite their widespread use and capabilities, these blockchains encounter issues with sluggish transaction speeds and high fees. Specifically, Bitcoin can process up to 7 transactions per second (TPS), while Ethereum manages approximately 15 TPS. To tackle these difficulties, developers have been focusing on layer-1 solutions that incorporate essential features intended to improve upon the legacy of these established blockchains.

Some of these components include:

  • Consensus mechanisms [Proof-of-Stake (PoS), Proof-of-Work (PoW), Directed Acyclic Graph (DAG), Hybrid]
  • Smart contract infrastructure 
  • Network security
  • Governance system 
  • Interoperability features
  • Economic model
  • Development infrastructure (APIs, SDKs, Node management) 
  • Performance optimization
  • Data management 

Over the past few years, I’ve noticed a trend towards more intricate consensus mechanisms in the blockchain world. In essence, multiple blocks are broadcast concurrently within a network, and it’s these consensus mechanisms that decide which chain the network should adhere to. For instance, one contemporary layer-1 platform that incorporates several features similar to those mentioned is Arthera. Arthera, an EVM-compatible Layer-1 blockchain, boasts native subscriptions, exceptional scalability, and a Decentralized Acyclic Graph (DAG) based Proof-of-Stake consensus model.

User-centric Blockchain Design

Blockchain technology, ecosystems, and platforms haven’t been the easiest to use—at least not yet. Accessibility for a revolutionary technology like this, especially for its adoption, cannot be overstated. For so long, traditional blockchain platforms have been criticized for their complexity, with users required to learn about/understand technical concepts like gas fees, blockchain addresses, consensus mechanisms, wallets and networks, and private keys. According to a research report by Triple- A, in 2024, there are currently 560 million crypto owners worldwide—a global crypto ownership average of 6.8%. A Chainalysis report called “The 2024 Crypto Spring Report“, showed the number of active crypto wallets had surpassed the 400 million addresses threshold. 

These numbers can be more but the industry needs to lower the entry barrier by focusing instead on accessibility with user-friendly interfaces, intuitive wallet infrastructure mirroring Web2 experiences, and simplified onboarding processes. This will make it easier for non-technical users to participate in the ecosystem. Apart from poor user interfaces, high transaction fees, and language barriers can make blockchain services both expensive and exclusive for a large portion of the global population. This accessibility problem is what popular layer-1 platforms like Self Chain are solving. It is a Modular Intent-Centric Access Layer-1 blockchain and keyless wallet infrastructure service that uses MPC-TSS/AA for multi-chain Web3 access. Its user-friendliness helps with simplifying DeFi processes, allowing everyone to participate in the revolution.

Future of Blockchain Infrastructure

The layer-1 blockchain ecosystem is a vital and huge part of the blockchain industry. This is evident with the current market capitalization of $1.94 trillion according to Coingecko. Bitcoin and Ethereum claim the lion’s share of this at $1.3 trillion and $315 billion respectively. While these are impressive numbers, the future of blockchain infrastructure is evolving towards a system that’s more modular and interoperable. A system where specialized layers work in harmony to address specific needs. 

We’re moving from traditional, rigid architectures towards adaptable and specialized systems, such as Arthera and Self Chain. Arthera, with its compatibility with the Ethereum Virtual Machine (EVM) and distributed consensus mechanism based on a directed acyclic graph (DAG), offers remarkable scalability while ensuring security and high transaction speed. On the other hand, Self Chain leverages advanced technologies like MPC-TSS/AA and keyless wallets to make it easier for more people to participate, breaking down past barriers in blockchain adoption. These advancements are paving the way for a future where blockchain platforms will be as user-friendly as standard web applications, while still preserving the core decentralized aspects of blockchain technology.

Conclusion

As a crypto investor, I find myself standing at the precipice of an exciting revolution in blockchain technology. The groundbreaking projects discussed herein aren’t merely bolstering the sector’s statistics or offering new features. Instead, they are redefining our very interaction with the blockchain on a fundamental level.

At long last, we’re witnessing progress towards solving decades-old obstacles that hindered widespread acceptance due to issues like scalability, cross-platform compatibility, and user-friendly experiences. While there are still hurdles to overcome, the groundwork being laid by these modern platforms is bringing us ever closer to a future where blockchain technology is more potent and accessible for all.

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2024-10-24 11:18