This post assumes the reader knows what a blockchain is.

Layer 1

Let’s start with what a layer 1 blockchain is. A layer 1 blockchain is your traditional blockchain, complete with peer-to-peer networking, storage, and consensus. Many well known blockchains are layer 1 blockchains, including Ethereum, Bitcoin, and Solana. A layer 1 blockchain has everything needed to execute and store transactions on the chain.

Layer 2

In order to improve on some deficiency in a particular blockchain, other, higher-level blockchains have arisen that build on top of layer 1 blockchains. These are “layer 2” blockchains. They use an underlying layer 1 blockchain but attempt to improve on some parts of it. Typical problems they attempt to solve are speed and costs. These chains have their own execution environment but then interact with the layer 1 blockchain. Examples of layer 2 blockchains include the Lightning Network on Bitcoin; and Arbitrum, Polygon, and Optimism on Ethereum.

Layer 0

In order to allow builders to create their own custom blockchain, layer 0 blockchains have arisen. A layer 0 blockchain is a blockchain that also supports multiple layer 1 blockchains. It contains all the building blocks needed to create a layer 1 chain and supports cross-chain communication. These building blocks include consensus, peer-to-peer networking, virtual machines for executing smart contracts, and block production. Examples of layer 0 blockchains are Avalanche, Horizen, Polkadot, Cosmos, and Metal Blockchain.

Conclusion

If you want to create a dapp, a decentralized application, you will most likely create this on a layer 1 or layer 2 chain, depending on your needs. If you want to create your own blockchain and have as much control over the operations as you need, you can build one from scratch or save a lot of time and gain built-in benefits by building on a layer 0 chain.