Layer 0 is a framework underlying all blockchain protocols. It ensures layer 1 blockchains are functional and can communicate with one another while allowing users to build blockchain-based businesses and decentralized applications, validate data sources, and more.
Introducing Layer 0
Layer 0 solutions aim to form a foundational framework to function underneath the layer 1 blockchains, the self-enclosed networks such as Bitcoin or Ethereum, in a bid to solve blockchain technology’s scalability problem and offer cross-chain communication.
A layer 0 is a type of protocol that enables developers to launch multiple layer 1 blockchains that can be designed to each serve a specific purpose and cater to 1 or 2 dimensions of the scalability trilemma as opposed to all 3.
Blockchain’s scalability problem refers to the common belief that it's not quite possible for blockchain networks to retain their unique properties and scale sustainably with current models, which eventually causes a poor experience with blockchain network congestion, high transfer fees, and slower transfer times. A layered architecture solution was put forward to tackle the problem and was popularized by the likes of Polkadot and its parachains.
This guide explains the scalability problem of blockchain ecosystem, how layer 0 protocols address the problem, and their processes.
Three Pillars of Blockchain and Scalability Trilemma
Blockchain technology is built on decentralization, security, and scalability.
Decentralization: A self-governing blockchain system sits at the core of blockchain technology. Instead of a central authority, such as a bank that verifies transactions and maintains a ledger for its customers, decentralized networks allocate the verification and maintenance to its users. This way, everybody participates in the management of the ledger, collectively authenticates every transaction, and keeps a log of their own.
To make decentralization a reality, a blockchain network requires creating a secure and trustless environment. To ensure that, blockchain networks rely on consensus mechanisms like PoW and PoS, which allow users to collectively authenticate transactions and be rewarded for their contribution, but always pose a risk of weighing down the network when there are too many transactions waiting.
Security: Implementing processes by which users collectively verify every transaction is also crucial for security to function without a central governing entity. This way, the network does the trust building for its users.
It is possible to limit network size in order to prevent congestion from happening, but that may lead to an easier breach of security. Limited nodal participation is believed to make a 51% attack easier, where bad agents take over more than half of the network and hold power to manipulate the transactions.
Scalability: Each network has a capacity for how many transactions they can carry out in a given time, called the throughput. As the user base and use cases, such as the use of decentralized applications, grows, so is the number of transaction requests — which leads to either congestion or rising transfer fees because now there are more nodes doing the work.
To prevent network congestion, and by extension poor user experience while retaining decentralization of security, blockchain networks need resources to scale sustainably.
The blockchain trilemma refers to the common belief that networks cannot achieve all three pillars at the same time.
This theory is demonstrated in Bitcoin’s growing pains, where it takes an average of 10 minutes to verify a block and miners can’t accommodate the growing list of awaiting transactions. The network adopted the Lightning Network as a second-layer solution to undertake some of its payments.
Ethereum is going through similar problems. Its user base has grown significantly along with the boom in decentralized finance applications built on the platform. As a result, the transaction fees have increased to the point where some users cannot engage with the platform.
How Does the Layer 0 Work?
Layer 0 blockchains address this problem by providing a network framework with the necessary arsenal for developers to build their own blockchains anchored to a main blockchain and distribute their workload. This leads to two outcomes;
Relieves the overdependence on existing blockchains to build dapps or other projects, as it's fairly difficult to start one’s own blockchain. Starting a layer 1 blockchain on a layer 0 blockchain protocol is comparable to starting an application on layer 1 blockchains.
Creates a multi-chain network with interoperability across chains, allowing chains to distribute the processing load in a secure manner and thus increasing their throughput.
This way, layer 1 blockchains can delegate scalability to a layer 0 protocol while they cater to other elements of the trilemma instead of attempting to satisfy all three properties. One of the valuable by-products is that from the perspective of the end-user, they may get the experience of engaging with several blockchains instead of one without having to switch by trading tokens.
Main Elements of a Layer 0 Blockchain
Layer 0 blockchains are comprised of three main components:
Main chain: Also referred to as relay chain, it functions as the main blockchain where transaction data from layer 1 networks are backed up.
Sidechains: Independent layer 1 blockchains that run parallel to the main chain. As sovereign networks, they have their own tokens, consensus mechanisms, and blockchain protocols, but may or may not rely on the mainchain for security.
Cross-chain transfer protocol: Blockchain protocols which ensures the safe exchange of information between two or more independent blockchain networks.
The Future of Layer 0 Protocols
Layer 0 protocols are commonly viewed as a legitimate alternative to smart contracts and an impeccable solution to the scalability problem surrounding blockchain networks. There is a handful of successful layer 0 platforms out there, most notably Horizen, Polkadot, and Cosmos, hosting a significant amount of decentralized applications and layer 1 protocols.
Harnessing layer 0 technology may unlock limitless scalability while solving blockchain’s major problem of network congestion, helping it to remain secure and truly decentralized.