Understanding Layer 1 Blockchain: Here’s Why India Needs It

Layer 1 blockchains are here to stay. They have revolutionised finance and technology and are the most popular form of blockchains.

By Nischal Shetty

Blockchain has been the biggest innovation after the Internet and is reshaping the world around us. For the uninitiated, blockchain is a decentralised and immutable digital ledger that securely stores information across a vast network of computers, often referred to as nodes. Each computer on the network maintains a copy of this ledger, ensuring transparency, security, and decentralisation. At the core of this revolutionary tech lies Layer 1 (L1). The foundational protocol layer is responsible for establishing consensus mechanisms, programming languages, block time, dispute resolution, and the rules and parameters governing a blockchain network's fundamental operation. L1 also influences the scalability and transaction throughput of the network, impacting the user experience and how quickly transactions can be processed.

However, as the number of blockchain users grows, the Layer 1 blockchain does not scale well. Despite the growing adoption of Web3, most L1s today are not built to scale. It has a lot to do with "blockchain trilemma” - a concept that highlights the trade-offs between three principles of blockchain technology: decentralisation, security, and scalability. For instance, some L1s might prioritise decentralisation and security and compromise on scalability which can lead to lower transaction throughput. An average TPS of 3 - 25 by L1s like Bitcoin or Ethereum is not close to the average TPS of 6,500 by Web2 giants like Visa. Solving the blockchain trilemma is crucial to unlocking the full potential of blockchain technology and providing users with scalable, secure, and decentralised solutions for various applications.

As the decentralised ecosystem continues to expand, the limitations of existing Layer 1 blockchains become evident, hindering the industry's full potential. To usher in a new era of growth, inclusivity, and scalability and grow to 1 billion users, we need ‘more decentralised and more scalable’ solutions.

While blockchain has witnessed significant advancements, several critical issues continue to impede its usability. One such challenge is the lack of autoscaling, a default scaling option found in traditional Web2 systems. This absence in existing L1 blockchains hinders their ability to adapt to the increasing demands of the decentralised ecosystem. As a result, as the number of Dapps and users grows, the networks become increasingly congested, resulting in slower transaction speeds and higher costs.

High transaction fees also restrict user participation in on-chain activities, pushing them towards centralised or less decentralised alternatives. This compromises the very principles upon which blockchain technology was built.

Why does India need a Layer 1 blockchain?

Layer 1 blockchains are here to stay. They have revolutionised finance and technology and are the most popular form of blockchains. While there are many concerns with their high costs and lack of scalability, sharding can address these.

We must dare to dream of a better future, one where blockchain technology truly transforms the lives of billions and goes beyond being a niche segment utilised by a few million users. To achieve this, we need L1 blockchains that are not only more decentralised but also inherently scalable.

With its vast population and diverse economy, India presents a unique opportunity for blockchain adoption. However, to harness the true potential of blockchain technology in India, we require an L1 solution that can address the challenges specific to this emerging market.

A decentralised scalable L1 blockchain with low fees is the need of the hour. Scalable L1 blockchains will undoubtedly play a crucial role in resolving the issue of high fees that currently hamper blockchain adoption. However, for emerging markets like India, long-term sustainability is the key. We need an L1 blockchain that can scale efficiently without compromising on the affordability aspect.

With a population of tech-savvy individuals, our country is well-poised to embrace blockchain technology on a massive scale. A decentralised and scalable L1 blockchain with low fees will not only open new avenues for businesses and entrepreneurs but also empower millions of Indians to participate actively in the decentralised economy. A scalable L1 blockchain can revolutionise various sectors in India, including supply chain management, healthcare, education, and governance. From increasing transparency to ensuring the authenticity of goods and services, blockchain's impact can be transformative for the country and its citizens.

As we embark on this journey, let us dare to dream big and build a blockchain ecosystem that empowers every individual, organisation, and nation to thrive in the decentralised world of tomorrow.

(The author is the co-founder of Shardeum, a decentralised scalable Layer 1 blockchain)

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