Business,Operations,GuideModule 4.4

Module 4.5

Layer 1 vs Layer 2 Networks

In our work, we mention Ethereum a lot as our main network (Layer 1), but there are also Layer 2 (L2) solutions and sidechains that we may use to save on fees or increase speed. It’s important to grasp the concept:

  • Layer 1 (L1): A base blockchain network – e.g., Ethereum, Bitcoin, etc. They are typically secure and decentralized but can be slow or have high transaction costs when congested.
  • Layer 2 (L2): A network or protocol that runs on top of a Layer 1 to improve scalability. L2s process transactions off the main chain (or in batches) and then post summarized results to L1, thereby inheriting L1’s security but with much higher throughput and lower fees for the actual usage. Examples in the Ethereum ecosystem include Polygon (sidechain), Arbitrum (rollup), Optimism (rollup), Base (rollup), and StarkNet (ZK-rollup), etc.

At Bittrees, we prioritize the best blockchain for its utility and purpose. We chose to deploy our contracts to Ethereum (mainnet) because of its battle tested security properties, access to capital markets, and legal precedent regarding DAO conflict resolution. We also deploy to Base because it’s faster and far cheaper per transaction than Ethereum, and it is the most popular consumer grade blockchain, making it suitable for certain dApps.

For instance, the Bittrees Research Preferred Stock is deployed across several evm blockchains, whereas on Base, minting it might cost a few cents, while on Ethereum it may cost some dollars in gas all depending on congestion at the time of the transaction. The user experience can be smoother on Base or other blockchains for frequent interactions and microtransactions.

From an operations perspective, you should:

  • Be aware of which network you are operating on for a given task. Using the wrong network (e.g., sending funds on Ethereum vs Base) to an address might result in no effect or funds going to an address on another chain where the recipient can’t easily use them.
  • Have the appropriate RPC (Remote Procedure Call) configurations in your wallet for networks like Base if needed. We can provide instructions to add networks to your wallet – for example, to use Basescan or send transactions on Base, you’d switch your wallet app to the Base network RPC. You can search through many of the available RPCs here: chainlist.
  • Understand that an address “0xABC…123” could exist on multiple networks, but the assets on one are not automatically on another. Bridging might be needed to move assets between L1 and L2.

Analogous concept: Think of Layer 1 vs Layer 2 like highways vs local roads. Ethereum L1 is a busy highway (high tolls during rush hour, but it’s the main artery). L2 is like a parallel service road or express lane – you can move faster and cheaper because not everyone is on it, and it periodically reconnects to the main highway (posts summary). You occasionally exit to the main highway for final settlement (that’s posting to L1).

For Bittrees, the detail you need to know is simply which platforms are on which chain:

  • Snapshot (voting) does off-chain signatures, doesn’t involve chain cost except verifying with wallet (no network needed except to sign, more in 4.7.
  • Safe smart-contracts (multi-signature accounts) can operate on multiple networks; Bittrees, Inc’s central governance safe accounts exist on Ethereum: gov.bittees.eth, community.gov.bittrees.eth, business.gov.bittrees.eth, technology.gov.bittrees.eth.
  • DApps can exist on multiple EVM compatible chains simultaneously
  • Our BGOV token (Bittrees, Inc. Common Stock) is published on Ethereum; our BTREE token (social-credit) is published on Ethereum and bridged to Base and other EVM compatible networks; our BNOTE token (Bittrees Research Preferred Stock) is published on Ethereum and Base (planning for more).
  • Ethereum (mainnet) has greater trust and security; L2s leverage this security, publishing mathematical proofs as transaction batches to mainnet. When publishing smart-contracts to a blockchain one must compare various tradeoffs such as: security, decentralization, transaction throughput, congestion, gas cost, and ecosystem.
  • Use the correct blockchain explorer: Bitcoin, Ethereum, Base, Optimism, Polygon, INK, BNB Smart Chain, and Arbitrum.

Module 4.6 -- Block Explorers and Transaction Hashes