Layer 0 Blockchain Protocols Explained | Definition & Examples

This guide focuses on the Layer 0 Blockchain networks, explaining what they are, the problems they solve, and how they work, as well as offering a breakdown of their architectures. Additionally, the guide also features a few examples of noteworthy Layer 0 blockchains currently in the market and their use cases.

What is a Layer 0 Blockchain?

So far, there are four layers of blockchains. They are:

• Layer 0;
• Layer 1;
• Layer 2;
• Layer 3.

Layer 3 Blockchain is the application layer that builds on top of the blockchain protocols and provides decentralized applications, smart contracts, and other value-added services to the network.

Layer 2 blockchain refers to a scaling solution that operates on top of the main blockchain protocol and aims to increase its throughput, reduce transaction fees, and enhance user experience. They are an alternative to Layer 0 but with far fewer benefits compared to their counterparts.

Most leading blockchains currently in the market are considered Layer 1 or base layer protocols. They include Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and Litecoin (LTC). However, due to their growing popularity over the last decade, it has become evident that they are prone to some key drawbacks.

The challenges include what is known as the ‘blockchain trilemma,’ a phrase coined by Ethereum founder Vitalik Buterin. According to Buterin, blockchain developers have to choose amongst three priority design aspects that will help define the focus of their protocols. These are scalability (speed), security, and decentralization.

Buterin posited that only two of these three aspects could be met for every decentralized protocol, but not all three. For example, Bitcoin, the flagship blockchain, is the most secure of its peers and (arguably) among the most decentralized, but it is slow, managing to process about five transactions per second (TPS) and a block production time of ten minutes.

Newer blockchains have opted for scalability and decentralization while deprioritizing security, and this is where Layer 0 comes in. As you’ll learn, these core layer protocols are designed to solve the biggest challenges facing Layer 1s, as described above.

Blockchain Challenges Layer 0 Protocols Seek to Solve

With the growing popularity of blockchain technology, experts have managed to identify three main challenges that most decentralized network protocols face. These are:

• Scalability;
• Cross-chain interoperability;
• Usability.

These three challenges represent the bulk of the issues faced by blockchains and their developers. Now, let’s dig deeper into what they are.

Scalability

Scalability is a measure of how flexible a protocol is when handling an ever-increasing load of transactions. Most blockchains can easily handle low traffic typically experienced during their initial start.

However, as they grow to accommodate a larger market share, they attract more traffic and users. This scenario leads to scaling challenges. As discussed before, blockchain designers have to decide which among three design aspects to focus on: scaling, security, or decentralization.

Most of the newer protocols have placed a premium on scalability and decentralization through consensus mechanisms such as Proof of Stake (PoS). This way, they ensure that they can handle more transactions and achieve high flexibility when it comes to handling more users.

To achieve their target scalability objectives, most have sacrificed security, exposing them to attacks that have led to the loss of funds and critical information. This is what is the scalability trilemma every protocol designer has to go through when creating a new blockchain.

Interoperability

Blockchain interoperability is the ability for two or more blockchains to communicate and share resources. For instance, Bitcoin and Ethereum could be considered interoperable if applications created on either are able to communicate with each other.

It is, however, not the case in this situation and in most other cases since a majority of the current blockchains are created through unique designs adhering to custom protocols. The result is segregated and isolated services with varying user experiences.

Developers have to learn varying skills and programming languages to adapt their applications or when creating new applications to run on various blockchain infrastructures.

As the blockchain scene matures, there is a growing need for the various decentralized applications (dApps) to communicate regardless of their host protocols. Different layered protocols, for instance, Layer 0s and Layer 1s, need to communicate to ensure the effective execution of tasks. The same is true of some Layer 1s and Layer 2 scalability solutions.

The most common solution for blockchain interoperability at the moment is using bridges, which are applications used to convert native tokens to be used on different protocols. However, there is a need for smoother interoperability as opposed to using bridges.

Flexibility and usability

Flexibility is the ease with which one can change from using one blockchain to the next. This is especially important for dApp developers looking to launch their applications on various networks.

At the moment, it is difficult designing one dApp to operate on multiple blockchains. For instance, a dApp created for Ethereum will not run on a competing chain, say Cardano or Solana. This means that a developer looking to launch a dApp on any or all of these platforms will have to create three versions of the same application.

More often than not, dApp developers will choose a single platform and create one version, thereby limiting their applications in terms of reach and features. There is a choice to make between launching an app on a scalable platform such as Solana or a more secure and decentralized one such as Ethereum.

There are merits and drawbacks to launching on any platform, but choosing one means losing out on the benefits of the other. This situation illustrates how inflexible the current blockchain development space is and why there is a need for a solution.

How Layer 0 Protocols Work to Solve These Challenges

There are three main elements that Layer 0 blockchain protocols have, and they are:

1. Main chain;
2. Side chain;
3. Inter-blockchain transfer protocol.

These three elements complement each other to achieve the desired goals, which, for most L0 protocols, is providing interoperability and scalability for host networks. Here’s a closer look into each element.

1. Main chain

As the name alludes, the main chain is the central blockchain onto which transactions are recorded and kept immutably. It is the underlying infrastructure that runs the L0’s governance and consensus mechanisms.

This means that information recorded from other derivative protocols or Layer 1s is kept on the main chain.

2. Sidechain

Sidechains or base layer chains are protocols that are designed to host decentralized apps and scalability solutions. If you are a developer looking to launch your next dApp, you can do so on the side chain of an L0 blockchain.

The main advantage of using L0 side chains is that most Layer 0 protocols encourage the deployment of specialized side chains or Layer 1s, which means that end-user experiences are more controlled and optimized as opposed to using a single-layer blockchain.

Side chain developers also have the option of designing their blockchains to use custom consensus mechanisms or opt to leverage the security of the underlying infrastructure or L0’s consensus mechanism. This way, they can outsource the security of their network and focus on scalability and decentralization and thereby circumventing the scalability trilemma.

3. Inter-blockchain transfer protocol

The final piece of the puzzle for Layer 0 blockchains is the cross-chain compatibility mechanism that enables various side chains to communicate with one another. A dApp on one blockchain platform can easily share data and information with another on a different side chain and with the L0.

There are several advantages to maintaining interoperability between various platforms, including enhancing specialization. Side chain developers no longer have to compromise on their creations. They now have the option of creating a highly-focused network that supports specialized dApps, which can share in/output data with other apps on different side chains to achieve their goals.

Popular Layer 0 Blockchain Protocols

Layer zero blockchain protocols are growing in number as more developers acknowledge the need and benefits of having more of these networks in place. So far, the more notable options in the marketplace include:

• Venom (VENOM);
• Polkadot (DOT);
• Cosmos (ATOM);
• Avalanche (AVAX).

All Layer 0 protocols, like L1s, operate more or less in a similar manner, except for some nuanced features that help to differentiate them. Let’s consider how these four L0 networks highlighted above operate and why they are worth an L1 developer’s consideration for their next project.

1. Venom Blockchain

Venom blockchain is a highly scalable, transparent, and secure Layer 0 network capable of processing as many as 100K – 1M transactions every second. The protocol is Turing-complete, meaning that it can host self-executing scripts (smart contracts) like Ethereum and Solana.

A standout feature of Venom is that it employs a hybrid consensus mechanism using both Proof of Stake (PoS staking) and Byzantine fault tolerance (BFT). Additionally, it is worth noting that the Venom Foundation, the entity behind the Venom L0 blockchain, is a fully regulated and registered institution by the Abu Dhabi Global Market (ADGM).

The Venom blockchain maintains three distinct layers typical of layer zero networks, and they include:

• Masterchains – this is the main chain and the backbone of the Venom protocol that utilizes PoS and BFT consensus algorithms;
• Workchains – these are specialized Layer-1 blockchains that can be used to achieve or serve various purposes. 
• Shardchains – these are blockchain partitions that are used to store and process a subset of the accounts running on the main chain. Sharding is what makes Venom highly scalable because the protocol can increase and reduce the number of shards dynamically according to demand.

2. Polkadot (DOT)

Polkadot is a creation of Ethereum co-founder Gavin Wood which launched on mainnet in 2020. The network, considered a “blockchain of blockchains,” enables developers to launch fully-fledged decentralized networks, also called parallel chains or parachains.

The parachains are interconnected, ensuring easy communication and resource sharing through the main chain, also called the Relay Chain, which functions are the bridge between the various L1 blockchains.

Similar to Venom, Polkadot also uses sharding as a scalability solution in conjunction with nominated PoS staking, which is a slight variation on the PoS consensus mechanism. All in all, these features allow Polkadot to process between 1K and 100K transactions per second.

3. Cosmos (ATOM)

Cosmos is another popular Layer 0 blockchain with a history dating back to 2014. The network includes a mainchain called the Hub and multiple side chains called Zones.

Zones are, essentially, blockchains that can host decentralized apps and are able to communicate with other dApps through the network’s Inter Blockchain Communication (IBC) protocol, thus enabling a seamless flow of data and information across the network.

Cosmos offers a suite of blockchain development tools called the Cosmos SDK (software development kit), which enables developers to whip up custom networks fast and cost-effectively.

So far, the Cosmos SDK has been used by developers to create several notable projects, including Binance’s Decentralized Exchange (DEX). Cronos Blockchain, dYdX, Osmosis, Oasis Labs, Kava, and Evmos.

4. Avalanche (AVAX)

Avalanche was launched in 2020 by Ava Labs, a blockchain development studio led by former Cornell University associate professor Emin Gün Sirer. The project focuses on providing scaling solutions through its three constituent blockchain layers, i.e.: X-chain, C-chain, and P-chain.

The P-chain is the platform layer that handles governance by facilitating validator coordination, while X-chain handles asset swaps or exchanges. The last layer, the C-chain or contract-chain, is the layer that supports automated scripts (smart contracts) akin to the Ethereum Virtual Machine (EVM).

Together, the X, C, and P Chains ensure that Avalanche is able to provide a base for launching and deploying dApps that are fast and scalable. The network is able to scale to infinity, with a sub-2 second transaction finality.

For consensus, Avalanche uses the common Proof of Stake, providing an avenue for blockchain investors to earn by staking their tokens and partaking in the network governance.

Final thoughts

Blockchain scalability is proving to be a major challenge hindering widespread adoption, hence the growing popularity of scaling solutions such as the Layer 2 and Layer 0 networks. The latter offers several advantages, including providing scaling platforms, and blockchain interoperability, among others.

However, these L0 solutions are still in their early stages, and whether they manage to achieve their goals remains to be seen. The blockchain space is highly dynamic, with an ever-increasing number of new projects launching by the day. The only way to truly gauge the success of Layer 0 blockchains will be to gauge who uses them and the impact level of projects created on them.

Frequently Asked Questions on Layer 0 Blockchain Protocols