Layer 1

What makes something a Layer 1

The defining characteristics:

• Independent consensus. Validators or miners reach agreement using the chain's own consensus mechanism, not borrowing security from another chain.
• Native settlement. Final state is recorded on the chain itself.
• Native asset. The chain has its own coin used for security (staking or mining rewards) and gas.
• Direct execution. Transactions execute on the chain's own state, not as proofs verified on a different chain.

This contrasts with Layer 2 chains, which inherit security from an underlying L1.

Major Layer 1 chains

A few of the most significant:

• Bitcoin — original L1; specifically a payment-focused chain with limited programmability.
• Ethereum — dominant smart-contract L1.
• Solana — high-throughput; specialized architecture for parallel execution.
• Cardano — research-driven proof-of-stake chain.
• Avalanche — three-chain architecture supporting custom subnets.
• Polkadot — multi-chain network with parachains.
• Sui, Aptos — Move-language chains from former Meta engineers.
• Monad — high-throughput EVM-compatible chain.
• BNB Chain — EVM-compatible high-throughput chain.
• Berachain — EVM-compatible with Proof of Liquidity consensus.
• Hyperliquid — perpetuals-focused L1.
• TON — Telegram-aligned chain.

Many more exist; the active L1 ecosystem includes hundreds of chains, though only a few dozen have meaningful activity.

What L1s compete on

Several dimensions:

• Throughput — transactions per second. Solana, Monad, and similar chains compete on raw speed.
• Cost — gas fees per transaction.
• Security — economic value backing consensus; track record of operation without major incidents.
• Programmability — what kinds of applications the chain supports well.
• Decentralization — number and distribution of validators.
• Ecosystem maturity — applications, tooling, developer community.
• Specific architectural advantages — parallel execution, novel consensus, integrated features.

Each L1 makes trade-offs across these dimensions. No chain is best on all axes.

The L1 landscape evolution

A few trends:

• From "Ethereum killer" to specialization. Earlier L1s positioned as direct Ethereum competitors; newer ones often target specific use cases (DeFi-native, gaming, perps trading).
• EVM compatibility increasingly common. Many newer L1s are EVM-compatible to leverage Ethereum tooling and developer base.
• Modular vs. monolithic debate. Some L1s (Solana, Monad) are monolithic; others embrace modular design with specialized layers.
• Restaking and shared security. EigenLayer and similar protocols offer alternative paths to security beyond running native L1 consensus.

What gives an L1 lasting value

A few empirical patterns:

• Network effects. Once an ecosystem (developers, applications, users, capital) reaches critical mass, displacing it is hard.
• Strong development culture. Active core contributors and community.
• Clear use cases. Chains that serve specific real demand persist; chains that just exist as "an L1" struggle.
• Resilience through cycles. Surviving multiple bear markets demonstrates durability.
• Reasonable monetary policy. Excessive inflation through aggressive emissions hurts long-term value.

By these criteria, Bitcoin and Ethereum have demonstrated the most durability. Newer chains have shown some traction but most haven't yet weathered enough cycles to prove durability.

L1 valuations

A complex topic. Major L1 tokens have valuations measured in tens or hundreds of billions:

• Bitcoin — roughly $1.5T market cap (early 2025).
• Ethereum — several hundred billion.
• Solana, BNB, others — top tier of altcoins.

The relationship between L1 token value and underlying network value is contested. Tokens are partly economic claims (gas demand, staking yield) and partly speculative bets on future network growth. Different valuation frameworks (transaction-fee-based, store-of-value, productive asset) produce wildly different fair-value estimates.

L1 vs. L2 dynamics

Layer 1s and Layer 2s have a sometimes-tense relationship:

• L2s extend L1 capacity but sometimes capture economic value that might otherwise accrue to L1.
• L1 fees compress as activity moves to L2s; this is intentional in Ethereum's roadmap but raises questions about long-term L1 economics.
• L2 bridge fees and operational economics are areas of contestation.
• Modular chains may shift the picture further as data availability layers compete with monolithic L1s.

Where this is heading

Several open questions:

• Will Solana sustain its growth and challenge Ethereum's smart-contract dominance?
• Will Monad and similar new high-throughput EVM chains capture meaningful share?
• How much activity moves to Layer 2s vs. staying on L1s?
• Whether TON's consumer integration produces lasting on-chain activity or just speculation cycles.
• How Hyperliquid and similar specialized L1s affect the broader L1 landscape.

The L1 space continues evolving. Bitcoin and Ethereum's durability seems clear; the third-tier ranking (which alternative L1s persist with material activity) remains contested.

What individuals should know

For investors:

• Most L1 tokens go to zero or near-zero over multi-cycle horizons. The category is highly competitive and most projects don't sustain long-term traction.
• Top-tier L1s (Bitcoin, Ethereum, occasionally one or two others) have demonstrated more durability.
• Diversification within L1s doesn't help much when the broader category trades together during stress.
• Long-tail L1s are speculative — high upside if they capture sustained adoption, but low base-rate probability of doing so.

For users:

• Most users don't need to choose L1s consciously. They use applications that exist on specific chains; the chain choice is largely invisible.
• Cost and speed differences matter for active users but not for occasional ones.
• Security trade-offs matter for high-value transactions; less for routine ones.