Understanding Altchains: A Comprehensive Explanation of Layer 0, Layer 1, and Layer 2

Understanding Altchains: A Comprehensive Guide

Have you heard about altchains but never knew what it meant? This video is intended to serve as a starting point for anybody interested in learning more about altchains. You may be a newbie starting out from scratch and dealing with blockchains for the first time, or you might already have some knowledge of btc or eth and want to branch out now. Either way, best believe you will be educated with this video!

What are Altchains?

Alternative blockchains (altchains) is an acronym for any blockchain that isn’t bitcoin or ethereum. Altchains arose in 2021 as a result of Ethereum’s scalability and transaction fee issues, and altchain developers seized the opportunity to create more scalable and low-cost blockchains to compete with Ethereum. Terra, Avalanche, and solana are just a few of the numerous alternative blockchains that exist today.

Understanding Layer 0 and Layer 1

To completely comprehend altchains, you must first know these ideas. Layer 0 is a protocol that allows layer 1 (L1) solutions interact on the same network. L1 blockchains are constructed on the basis of Layer 0, which allows the complete blockchain to be placed on top of it. An example of the Layer 0 protocol is the Polkadot network. In a decentralized blockchain ecosystem, L1 refers to the basic primary blockchain network. Layer-1 blockchains include Bitcoin, Ethereum, and Solana.

Layer 2 Solutions and Sidechains

Layer 2 or L2 is a third-party integration that continues to work on the upper end of a layer-1 blockchain to help scale a proposal by processing transactions outside of the main blockchain (L1) while preserving the very same stability and decentralization. A sidechain, such as Ethereum, is a secondary blockchain that runs in parallel to the main L1 chain. What separates layer 2 solutions and sidechains is that sidechains are separate blockchains connected to the mainchain, each with its own consensus method. Layer 2 solutions, on the other hand, are built as extensions of mainchains and depend on their security framework.

Altcoins and Altchains

Altcoins or alternative coins refer to any cryptocurrency that isn’t Bitcoin. They can be grouped into different tokens such as DeFi tokens, meme tokens, utility tokens, NFT tokens, stablecoins, etc. Most of them are commonly minted on altchains and do not belong to their own blockchain.

Understanding EVM and Wallet Setup

EVM stands for Ethereum Virtual machine and is a virtual environment that gives developers an opportunity to create smart contracts on the Ethereum blockchain. To get started with altchains, you need to set up a wallet that supports the specific blockchain you want to explore. It is recommended that novice users begin with a browser wallet because certain wallets are only compatible with particular chains.

Buying and Storing Altcoins

To begin your altcoin journey, you can get your first crypto money from a reputable centralized crypto exchange (CEX). It is important to choose a CEX based on its reliability and trustworthiness. Once you have purchased altcoins, you need to store them in a wallet that supports the specific blockchain.

Using Altcoins on Altchains

Processing transactions on a blockchain usually involves transaction fees, which are usually paid in the chain’s native coins. Depending on the altchain you are using, you may need to acquire the native tokens to cover transaction fees. Altcoins can be used to interact with various dApps and protocols on altchains, such as lending protocols or decentralized exchanges.

Transferring Altcoins Across Chains

Crypto users often have limited finances to experiment when it comes to multiple chains. There are two methods for transferring money from one blockchain to another: converting your existing funds into native tokens or stablecoins of the original blockchain and then swapping them for native tokens or stablecoins on the selected blockchain, or using cross-chain bridges to transfer funds directly from one blockchain to another.

Using Explorers to Track Transactions

If you’re confused about the status of your transactions or have any other concerns, you can use blockchain explorers to examine transaction status and history. By inputting your wallet’s public address into the explorer, you can easily track your transaction history.

Frequently Asked Questions

What are altchains?

Altchains are alternative blockchains that are not Bitcoin or Ethereum. They were created to address scalability and transaction fee issues.

What are layer 0 and layer 1 in altchains?

Layer 0 is a protocol that allows layer 1 solutions to interact on the same network. Layer 1 refers to the basic primary blockchain network.

What are layer 2 solutions and sidechains?

Layer 2 solutions are third-party integrations that help scale proposals by processing transactions outside of the main blockchain. Sidechains are separate blockchains connected to the mainchain, each with its own consensus method.

What are altcoins?

Altcoins are alternative cryptocurrencies that are not Bitcoin. They can be grouped into different tokens and are commonly minted on altchains.

How do I buy and store altcoins?

You can buy altcoins from reputable centralized crypto exchanges (CEX) and store them in wallets that support the specific altchain.

How can I use altcoins on altchains?

Altcoins can be used to interact with various dApps and protocols on altchains, such as lending protocols or decentralized exchanges.

How can I transfer altcoins across chains?

You can convert your existing funds into native tokens or stablecoins of the original blockchain and then swap them for native tokens or stablecoins on the selected blockchain. Alternatively, you can use cross-chain bridges to transfer funds directly from one blockchain to another.

How can I track my altcoin transactions?

You can use blockchain explorers to track the status and history of your altcoin transactions by inputting your wallet’s public address into the explorer.

In conclusion, altchains provide alternative solutions to the scalability and transaction fee issues faced by Bitcoin and Ethereum. By understanding the concepts of layer 0, layer 1, layer 2, sidechains, altcoins, and EVM, users can navigate the world of altchains and explore the various opportunities they offer. Whether it’s buying and storing altcoins, using them on altchains, or transferring them across chains, there are multiple ways to engage with altcoins and benefit from the innovations of altchains.