Layer 1 & Layer 2

Node: Any computer that hosts the cryptocurrency’s platform and stores the entire blockchain on it. It acts as a validator by confirming each block before adding it to the chain.

Layer 1: The transactions that happen between the nodes. Basically the barebone blockchain itself, where the transactions take place. It provides security and anonymity through decentralization. Layer 1 is slow and capable of handling only a certain number of transactions. So when the demand is high, the fees increase and there is a delay in transaction. To address these, Layer 2 applications are created.

Layer 2: To address the performance and fee issue of layer 1, layer 2 is created which can be thought of as a side-platform to handle certain aspect of transactions so that the resources of Layer 1 are used only for what’s essential for transactions. In other words, Layer 2 allows scalability.

Example: Bitcoin blockchain is Layer 1 and Lightning Network is Layer 2.