Blockchain Infrastructure

What is the difference between Layer 1 and Layer 2 blockchains?

A Layer 1 is a base blockchain that settles transactions and provides security itself, while a Layer 2 is built on top of a Layer 1 to process transactions more cheaply and then settle them back. Bitcoin, Ethereum, and Solana are Layer 1 networks; Arbitrum and many Polygon chains are Layer 2 networks that depend on Ethereum for final security. The practical trade-off is that Layer 1 offers maximum security directly, while Layer 2 trades a degree of that for speed and lower fees. Qatobit's index methodology accounts for these structural roles when assessing assets.