One of the major challenges facing blockchain networks is transaction throughput—the number of transactions a network can process within a given period.
Different blockchain networks have different throughput limits because transactions require computation, storage, and network resources.
A related challenge is known as the Blockchain Trilemma. It describes the difficulty of simultaneously maximizing three properties:
Security — protecting the network from attacks and manipulation.
Scalability — processing a large number of transactions efficiently.
Decentralization — distributing control and validation across many participants rather than relying on a central authority.
Improving one property can sometimes create trade-offs with the others.
Layer 1 vs. Layer 2
Understanding Layer 1 (L1) and Layer 2 (L2) is important when studying blockchain scalability.
Layer 1
A Layer 1 blockchain is the underlying blockchain network itself. It handles fundamental functions such as:
Transaction processing
Consensus
Blockchain security
Data storage
Examples include Ethereum and Bitcoin.
Layer 1 networks can use different consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS).
Layer 2
A Layer 2 solution is built on top of a Layer 1 blockchain.
The goal is generally to process some activity away from the main chain and then use the Layer 1 blockchain for security, settlement, or verification.
This can help increase transaction capacity and potentially reduce costs.
A simple way to remember it:
Layer 1 = the underlying blockchain
Layer 2 = additional infrastructure built on top of it to improve scalability
Layer 1 Scaling Solutions
There are several ways a blockchain can attempt to increase its capacity.
1. Increasing block size
A blockchain can increase the amount of data that can fit into each block.
If more transactions can fit into a block, the network can potentially process more transactions per unit of time.
However, larger blocks can also increase the resources required to store, transmit, and validate blocks, which can create decentralization and other engineering trade-offs.
2. Sharding
Sharding divides blockchain data or processing into separate partitions called shards.
Instead of requiring every participant to process every piece of work, different parts of the network can handle different portions of the workload.
This can allow work to happen more efficiently and, in some designs, in parallel.
3. Improving the consensus mechanism
Changes to a blockchain's protocol and consensus mechanism can improve efficiency and throughput.
This might involve optimizing how transactions are processed, validated, or communicated across the network.
However, simply changing the consensus mechanism does not automatically solve every scalability problem; security and decentralization must also be considered.
Layer 2 Scaling Solutions
Layer 2 technologies attempt to increase blockchain capacity by moving some processing away from the Layer 1 chain.
Two important examples are rollups and sidechains, although they work differently.
1. Zero-Knowledge Rollups
Zero-Knowledge Rollups (ZK-rollups) process and bundle transactions away from the main Layer 1 chain.
Instead of putting every transaction's full computational work directly onto Layer 1, the Layer 2 system can process many transactions and provide a cryptographic proof that the computation was performed correctly.
The Layer 1 blockchain can then verify that proof.
This can increase transaction capacity while retaining important security properties of the underlying blockchain.
Important: ZK-rollups are not primarily about keeping transactions private. The "zero-knowledge" technology can provide privacy in some systems, but many ZK-rollups use zero-knowledge proofs primarily for efficient verification of computation.
2. Sidechains
A sidechain is a separate blockchain that is connected to another blockchain, often called the main chain.
A sidechain generally has:
Its own blockchain
Its own consensus mechanism
Its own validators or security model
A mechanism for transferring assets or information between chains
Because activity can take place on the sidechain instead of directly on the main chain, it can provide additional transaction capacity.
However, a sidechain's security model can differ significantly from the security model of the Layer 1 blockchain it connects to.
Quick Comparison
| Approach | Where processing happens | Main idea |
|---|---|---|
| L1 block-size increase | Layer 1 | Fit more data into each block |
| L1 sharding | Layer 1 | Split work/data into partitions |
| L1 protocol/consensus improvements | Layer 1 | Make network operations more efficient |
| ZK-rollup | Primarily Layer 2 | Process many transactions and submit proofs/results to L1 |
| Sidechain | Separate blockchain | Move activity to another network with its own consensus |
Key takeaway
The central scalability problem is that blockchain networks have limited resources for processing, storing, and validating transactions.
The main approaches are:
Layer 1 scaling: improve the underlying blockchain itself.
Layer 2 scaling: move some activity away from the main blockchain while maintaining a connection to it.
And the broader challenge is the Blockchain Trilemma:
Security ↔ Scalability ↔ Decentralization
Understanding this trade-off helps explain why blockchain developers use technologies such as sharding, rollups, and sidechains rather than relying on a single solution.