The Problem
Since the first mainstream iteration of blockchain in 2009 – Bitcoin – there has been a plethora of layer 1 blockchains launched with unique benefits and drawbacks. While the innovation and competition are fantastic, the current landscape of the crypto ecosystem is hindered from functioning at its maximum potential due to one key issue, interoperability.
To paint a picture, many of the different blockchains are built and optimized for different specific uses, for example, Ethereum is the largest Decentralized Finance (Defi) ecosystem because it’s very decentralized and secure, while Solana is a great gaming and NFT platform because it has high transaction throughput. However, on the downside, Ethereum isn’t highly scalable in its current state, and Solana, due to being very centralized, has gone down or been hacked on multiple occasions.
Since these, among many other blockchains, have different pros and cons wouldn’t it be great if there was a way for all of these ecosystems to integrate so users can easily jump between them for different tasks? The obvious answer is yes, but how do we connect all of these layer1 blockchains together to create a fully integrated ecosystem?
Introducing Layer0 Protocols
There are layer1, layer2, and even some layer3 blockchains, but the latest layer to be developed is layer 0 protocols in an effort to solve the interoperability issue and create a more integrated Web3 landscape.
While layer1s and layer2s are all similarly structured blockchains, Layer0 protocols are interesting because while they each do have a main blockchain, they are more a concept than they are a particular structure. This is because the different layer0 protocols all go about solving the interoperability problem in different ways.
There are quite a few layer0 protocols, but the prominent ones today are Avalanche, Cosmos, and Polkadot.
When thinking about a layer0 protocol the best way is to think about it less so as an underlying blockchain with other blockchains being built on top of it, and more so as a protocol, infrastructure, or networking framework that each layer 1 blockchain can build into their protocol allowing them to all interoperate – easily integrate and share information.
Simply Breaking down the most popular Layer0s
Because most layer0s function quite differently in many ways, the best way to understand them is by understanding on a simple level how each of them works.
Polkadot structure:
As demonstrated below, the Polkadot ecosystem is comprised of 3 key components:
The Relay chain which is the main Polkadot chain, this is the foundational blockchain that holds the data and orchestrates the ecosystem.
The parachains which are independent layer1 blockchains that essentially plug into the relay chain in order to be interoperable with the Polkadot ecosystem.
Bridges that connect the parachains to blockchains outside of the Polkadot ecosystem.
A Key differentiating factor that makes Polkadot unique from other layer0s is it only has 100 relay chain slots, making it a much more exclusive ecosystem, one could argue that this is a bad thing, although the barriers to entry could also be argued as a benefit because the quality of chains and protocols in the ecosystem would be much higher.
The parachain slots are auctioned off, these auctions are denominated in DOT Tokens – which is the native token for the ecosystem. In order for a layer1 to get a parachain slot they must outbid other layer1 chains, when a slot is secured the parachain must lock up its DOT tokens during the duration of which they are using the parachain slot, slots can be leased for 3 month periods with a maximum of 2 years upon which the slot will go back to auction, this ensures that projects in the ecosystem remain competitive.
Avalanche structure:
Avalanche has a much lower barrier to entry and it’s unique in the fact that its main network is actually distributed into 3 chains as opposed to Polkadots one.
The C-chain: is the smart contract chain, it uses an avalanche version of the Ethereum virtual machine and its primary purpose is for launching smart contracts with the C-chain API.
The P-chain: is the platform chain and it coordinates validators, keeps track of the subnets, and it also allows for the creation of new subnets and blockchains through the P-chain API.
The X-chain: is the exchange chain and it is essentially a platform that allows for the trading of digital assets, one of which is the AVAX token – the native token which is used for staking and paying transaction fees on the Avalanche network. The X-chain also allows for the creation of digital assets through the X-chain API.
The avalanche ecosystem is comprised of custom subnets, and within those subnets are custom blockchains. The creators of subnets can control their subnets rules, how private it is, and who can be a validator on it.
In order to be a validator on a subnet you must also help validate the main chain by staking 2000 AVAX.
Cosmos structure:
The cosmos ecosystem is comprised of hubs and zones, hubs are more core blockchains such as osmosis chains or the main cosmos hub.
The zones are unique blockchains that can connect to the ecosystem and be interoperable with the other chains, transfers between chains go through the nearest hub for validation.
Cosmos uses IBC which is their technology for inter-blockchain communication, this is the technology that allows the ecosystem of chains to be interoperable. Cosmos refers to itself as the internet of blockchain, with its main goal being to build the foundation for web3, its also the most prominent layer0 ecosystem currently with over 260 projects including crypto.com coin, Binance chain, and many other innovative web3 projects.
Through creating a platform for extensive ecosystems of innovative finance, media, social, and productivity projects that can all work in tandem, Layer0s undoubtedly have a place in the future of web3, among other interoperability protocols. (more on that in future articles)