Layer 2: Scaling Solutions for Expensive Blockchains Layer 2 networks solve Ethereum’s biggest problem – ridiculous gas fees. They process transactions cheaply and quickly while inheriting Ethereum’s security. Layer 2 is a separate blockchain or protocol built on top of a main blockchain (Layer 1) to improve scalability and reduce transaction costs. These solutions handle…
Layer 1: The Foundation Blockchain Layer 1 refers to the base blockchain protocol that processes transactions and maintains consensus. It’s the foundation that everything else builds on top of. Layer 1 (L1) is the main blockchain network that handles transaction processing, consensus, and security independently without relying on other blockchains. These are the foundational networks…
Consensus Mechanism: How Networks Agree Consensus mechanisms solve the fundamental problem of getting thousands of independent computers to agree on a single version of truth without central authority. A consensus mechanism is the process by which a distributed network of nodes agrees on the validity of transactions and the current state of the blockchain. It…
51% Attack: When Consensus Gets Hijacked A 51% attack occurs when a single entity controls the majority of a network’s mining power or stake, allowing them to manipulate transactions and double-spend coins. A 51% attack is when an individual or group controls more than half of a blockchain network’s mining hash rate or staking power,…
Proof of Work (PoW): Bitcoin’s Security Model Proof of Work is how Bitcoin solves the double-spending problem without trusted authorities. It’s energy-intensive by design – that’s a feature, not a bug. Proof of Work is a consensus mechanism where miners compete to solve computationally difficult puzzles to validate transactions and create new blocks. The winning…
Proof of Stake (PoS): Energy-Efficient Consensus Proof of Stake secures blockchain networks through economic staking rather than energy-intensive mining. It’s like replacing a gold rush with a security deposit system. Proof of Stake (PoS) is a consensus mechanism where validators are chosen to create new blocks based on their stake in the network rather than…
Mining: How New Bitcoins Are Created Bitcoin mining is the process that creates new bitcoins and secures the network. It’s like a global lottery where miners compete to solve mathematical puzzles for rewards. Mining is the computational process of validating transactions and adding new blocks to a blockchain while earning newly created cryptocurrency as rewards….
Mining Pool: Collaborative Block Mining Mining pools combine computational power from multiple miners to increase chances of finding blocks and earning rewards. It’s like joining a lottery syndicate to improve your odds. A mining pool is a collaborative group of cryptocurrency miners who combine their computational resources to increase their chances of successfully mining blocks…
Block Reward: Miner and Validator Compensation Block rewards are the cryptocurrency payments that miners and validators receive for successfully adding new blocks to the blockchain. It’s how networks incentivize security without charging transaction fees. Block reward is the amount of cryptocurrency awarded to miners or validators for successfully creating and validating a new block on…
MEV (Maximal Extractable Value): The Hidden Tax on DeFi MEV is the extra profit that miners and validators can extract by reordering, including, or excluding transactions within blocks. It’s like cutting in line at the blockchain cafeteria. Maximal Extractable Value (MEV) is the additional profit that block producers can capture by strategically ordering transactions, beyond…