The terms “layer 1” and “layer 2” get tossed around a lot in cryptoland. They are important concepts to grasp in reference to the blockchain, but they can also be a bit confusing.

Layer 1 refers to a base blockchain protocol, (e.g., Bitcoin or Ethereum) while layer 2 refers to a third-party protocol built to have integrated functionality with that base blockchain.

• Layer 1 and layer 2 refer to different types of blockchain scaling solutions that attempt to improve throughput and the speed of a given blockchain.

• A layer 1 scaling solution refers fundamental changes made to a base-layer blockchain in order for it to process more transactions.

• A layer 2 scaling solution is a third-party protocol that uses various tools to improve the speed of the base layer blockchain without making any fundamental changes to its code or architecture.