Layer 0 protocols form the foundation upon which Layer 1 blockchains are constructed. They serve as the infrastructure for blockchain networks and applications, aiming to address industry issues such as scalability and enabling interoperability between blockchains.^[1]

Overview

The demand for dApps has been increasing and would lead to increased capital flow into the blockchain space for supporting development. The growing demand for layer 1 blockchains as infrastructures for dApps and web3 development has uncovered the pain points associated with layer 1 networks. For example, they would struggle to meet the requirements of developers alongside end users with contradictory views regarding the balance between scalability, decentralization, and security.^[5]

Layer 0 protocols form the foundation that Layer 1 blockchains are constructed on. They serve as the infrastructure for blockchain networks and applications, aiming to address industry issues such as scalability and enabling interoperability between blockchains. Layer 0 protocols enable developers to launch customized Layer 1 blockchains designed for specific applications or use cases. With the support of Layer 0s, developers can focus on applications instead of consensus and security.^[1][2][4]

Layer 0 protocols help to remedy the challenges faced by Layer 1 networks built with a monolithic architecture, such as the Ethereum network. By creating a more flexible base infrastructure and letting developers launch their own purpose-specific blockchains, Layer 0 hopes to more efficiently tackle probl^[4][4]ems such as scalability and interoperability. ^[3]

Layer 0 blockchains emerged as a more scalable and efficient alternative in the blockchain ecosystem. They can help in managing large volumes of transactions alongside serving the advantages of better privacy and security. ^[5]

Interoperability

Interoperability refers to the ability of blockchain networks to communicate with one another. This property enables a more tightly interwoven network of blockchain-enabled products and services, which in turn offers a better user experience. 
Blockchain networks built on the same Layer 0 protocol can interact with one another by default, without the need for dedicated bridges. Using different iterations of cross-chain transfer protocols, Layer 0 allows an ecosystem’s blockchains to build upon one another’s features and use cases. Some common outcomes of this are enhanced transaction speeds and greater efficiency^[3]

Layer 0 protocols aim to allow Layer 1 blockchains to communicate and interoperate, striving to provide users with a seamless experience across multiple networks. Without the interoperability solutions provided by Layer 0 networks, individual blockchains would largely operate in isolation. This limits their utility and hinders the networking effects that arise when systems cannot communicate and interact with each other.^[1]

Scalability

A monolithic blockchain such as Ethereum is often congested because a single Layer 1 protocol is providing all the critical functions, such as transaction execution, consensus, and data availability. This creates a bottleneck for scaling that Layer 0 can alleviate by delegating these critical functions to different blockchains. 
This design ensures that blockchain networks built upon the same Layer 0 infrastructure can each optimize certain tasks, thereby enhancing scalability. For example, execution chains can be optimized to handle high numbers of transactions per second. ^[3]

Developer flexibility

To encourage developers to build on them, Layer 0 protocols often provide easy-to-use software development kits (SDKs) and a seamless interface to ensure developers can easily launch their own purpose-specific blockchains. 
Layer 0 protocols give developers great flexibility to customize their own blockchains, allowing them to define their own token issuance models and control the type of DApps they want built on their blockchains.^[3]

Layer Descriptions

A blockchain ecosystem can be classified according to the following layers:

• Layer 0: The underlying infrastructure upon which multiple Layer 1 blockchains can be built.
• Layer 1: Base blockchains used by developers to build applications, such as decentralized applications (DApps).
• Layer 2: Scaling solutions that handle activities off Layer 1 blockchains to ease their transactional loads.
• Layer 3: Blockchain-based application layer, including games, wallets, and other DApps.

However, not all blockchain ecosystems can be classified into these categories. Some ecosystems may miss certain layers, while others can be categorized as different layers, depending on the context. ^[3]

How Layer 0 Works

There are different ways in which Layer 0 protocols operate. Each differs in its design, features, and focuses.
But generally, Layer 0 protocols serve as the main and primary blockchain backing up transaction data from various Layer 1 chains. While there are clusters of Layer 1 chains built on Layer 0 protocols, there are also cross-chain transfer protocols that enable tokens and data to be transferred across different blockchains.^[3]

Several Layer 0 protocols adopt a relay/sidechain-based infrastructure, which mainly consists of three components - mainchain, sidechain and cross-chain. A mainchain supports the data transfer between Layer 1s, while sidechains are application-specific Layer 1s connected to the mainchain. The cross-chain communication protocol acts as a standard for data exchange amongst the Layer 1s.

• Main Chain
  Mainchain serves as the primary blockchain or the layer 0 blockchain, which stores all the transaction data from different layer 1 chains.^[5]
• Sidechains
  Sidechains are independent layer 1 networks that have their own collection of validator nodes and can run their independent consensus mechanisms. The sidechains do not depend on the main chain for security. However, they would share the security of the primary chain as it is the most decentralized and biggest chain. 
  Sidechains in a layer 0 network could share security in different ways. For example, users could stake the native token of the layer 0 chain for becoming a validator on a layer 1 network. It implies that users could lose their layer 0 token stake and their layer 1 stake for submitting fraudulent transactions.
  On the other hand, layer 1 blockchains could also periodically share their network state, transaction history, and updated record of account balances with layer 0. It helps in keeping a backup with a network with more security for scenarios where the layer 1 networks are compromised. ^[5]
• Cross-Chain Transfer Protocol
  It is important to note that the cross-chain transfer protocol could appear in different forms in different layer 0 networks. The primary objective of the cross-chain transfer protocol is the flexibility for enabling transfer of tokens and different forms of data between blockchains in a completely secure and trustless manner. In the case of Cosmos, the cross-chain transfer protocol is Cosmos IBC. Avalanche uses the Avalanche Warp Messaging protocol, while Polkadot uses the Polkadot XCMP protocol.^[5]

Examples of Layer 0 networks

Cosmos, Polkadot, and Avalanche are examples of Layer 0 networks that use the relay/sidechain structure. Newcomers like LayerZero and zkLink represent the next progression of multichain interoperability.^[2]

Polkadot

Ethereum co-founder Gavin Wood designed Polkadot to allow developers to build their own blockchains. The protocol uses a main chain — called the Polkadot Relay Chain — and each independent blockchain built on Polkadot is known as a parallel chain, or parachain.
The Relay Chain functions as a bridge between parachains to enable efficient data communication. It uses sharding, a method of splitting blockchains or other types of databases, to make transaction processing more efficient.
Polkadot uses proof-of-stake (PoS) validation to ensure network security and consensus. Projects that want to build on Polkadot participate in auctions to bid for slots. Polkadot’s first parachain project was approved in an auction in December 2021.^[3]

Avalanche

Launched in 2020 by Ava Labs with a focus on DeFi protocols, Avalanche uses a tri-blockchain infrastructure consisting of three core chains: the Contract Chain (C-chain), the Exchange Chain (X-chain), and the Platform Chain (P-chain).
These three chains are configured specifically to handle major functions within the ecosystem, in order to enhance security while aiming for low latency and high throughput. The X-Chain is used to create and trade assets, the C-Chain to create smart contracts, and the P-Chain to coordinate validators and subnets. Avalanche’s flexible structure also makes fast and cheap cross-chain swaps possible.^[3]

Cosmos

Founded in 2014 by Ethan Buchman and Jae Kwon, the Cosmos network consists of a PoS blockchain mainnet called Cosmos Hub and customized blockchains known as Zones. Cosmos Hub transfers assets and data between the connected Zones and provides a shared layer of security. 
Each Zone is highly customizable, allowing developers to design their own cryptocurrency, with custom block validation settings and other features. All Cosmos apps and services hosted in these Zones interact via the Inter-Blockchain Communication (IBC) protocol. This enables assets and data to be freely exchanged across independent blockchains.^[3]