**Understanding Layer 1 and Layer 2 Solutions**

The concept of layer 1 and layer 2 solutions is a crucial aspect of blockchain technology. In simple terms, layer 1 solutions are built directly on top of the underlying blockchain technology, while layer 2 solutions are more advanced technologies that lie above the blockchain.

**Layer 1 Solutions**

Layer 1 solutions use the actual cryptocurrency or blockchain itself as their foundation. These solutions aim to mitigate some of the disadvantages associated with blockchain technology, such as scalability and speed issues. One solution within this category is called sharding. Sharding involves splitting up all of the code or aspects of a decentralized application into smaller, independent pieces called shards. These shards are then distributed across the blockchain network, allowing for faster execution and increased cost effectiveness. For example, if you were to split your application into multiple threads or cores, sharding works in a similar way, but on a much larger scale.

**Sharding: A Layer 1 Solution**

Sharding is a technique used to increase the speed and cost-effectiveness of blockchain-based applications. By splitting up all of the code into smaller shards, these shards can be executed independently, reducing the overall processing time required for complex transactions. This approach allows developers to build more efficient and scalable decentralized applications, making it easier for users to interact with them.

**Layer 2 Solutions**

Layer 2 solutions, on the other hand, are more advanced technologies that lie above the underlying blockchain technology. These solutions aim to address some of the scalability and speed issues associated with layer 1 solutions. One example of a layer 2 solution is called state channels. State channels allow two users to communicate without using the blockchain in the way it would normally work. Instead, these transactions are processed through a separate channel, reducing latency and fees associated with traditional blockchain transactions.

**State Channels: A Layer 2 Solution**

State channels operate by allowing two users to communicate with each other using a private, off-chain channel. This allows for faster transaction processing and reduced costs compared to traditional blockchain-based transactions. Once the communication is complete or the transaction is finalized, only then is it uploaded to the blockchain. This approach enables the creation of more efficient decentralized applications, where microtransactions can occur without incurring high fees.

**Decentralized Applications**

Decentralized applications (dApps) are a key aspect of blockchain technology. These applications operate on top of blockchain networks and enable users to interact with them without relying on centralized authorities or intermediaries. Two examples of dApps are Uniswap, a decentralized finance protocol that allows users to exchange cryptocurrencies for each other, and Haudelum Poker, a decentralized version of Texas Hold'em poker.

**Uniswap: A Decentralized Finance Protocol**

Uniswap is a decentralized finance protocol built on the Ethereum blockchain. It enables users to exchange cryptocurrencies for each other in a trustless manner, without relying on centralized exchanges or intermediaries. Uniswap operates by using a liquidity pool-based system, where users can provide liquidity to trade tokens.

**Haudelum Poker: A Decentralized Poker Game**

Haudelum Poker is a decentralized version of Texas Hold'em poker built on the blockchain. It allows players to interact with each other without relying on centralized authorities or intermediaries. Players can join games and compete against each other, with winnings being distributed in a trustless manner.

**Conclusion**

In conclusion, layer 1 and layer 2 solutions are essential components of blockchain technology. While layer 1 solutions aim to mitigate some of the disadvantages associated with blockchain technology, layer 2 solutions offer more advanced technologies that lie above the underlying blockchain technology. By understanding these concepts, developers can build more efficient and scalable decentralized applications, enabling users to interact with them in a trustless and secure manner.

**About the Author**

The author is a cryptocurrency expert who has been involved in the development of various blockchain-based projects. He has worked closely with Cartesi, a company that specializes in developing layer 1 and layer 2 solutions for decentralized applications.

**Stay Up-to-Date**

For more information on blockchain technology and decentralized applications, stay tuned to future videos from the author and Cartesi. Follow the link in the description to learn more about Cartesi's solutions and how they can help build more efficient and scalable decentralized applications.

"WEBVTTKind: captionsLanguage: enhello everybody and welcome to another youtube video so in today's video i'm going to be talking about blockchain technology and d apps otherwise known as decentralized applications now i want this video to act as a high level introduction to decentralized applications and how you can use blockchain technology to actually create apps now the reason i'm making this is because recently there's been a lot of hype around cryptocurrency but a lot of people look at cryptocurrency and blockchain in general and think that's only a way to make money they treat it simply as an investment and something that they can trade almost like a stock however there's a completely different side of cryptocurrency which is the development side well that's what this video is going to focus on so in this video i'm going to talk to you about what a blockchain is what decentralization is what a d app is and then the pros and cons of a d-app and some of the different solutions that companies are implementing to create d-apps however before we go any further i do need to mention that i myself am not a cryptocurrency or blockchain expert and that's why for this video i teamed up with a company called cartesi which helped me shape a lot of the content in this video now cartesia is a company that's dedicated to making the blockchain and cryptocurrency more accessible to developers like you and i they have a ton of different products and solutions that allow the blockchain to be more affordable to use easier to use and they just provide a bunch of tutorials resources and really cool products and you can check them out from the link in the description now they also are the sponsor of this video i'll likely be working with them in the future to create in-depth tutorials on how to actually make decentralized applications but as i said in this video it's just going to be a high level overview on how d apps work so let's go ahead and get started so before we get into decentralized applications the first thing you need to understand is what a blockchain is so i'll give you a simple definition here a blockchain is a system of storing information that makes it extremely difficult or impossible to hack cheat or change so generally speaking we can trust this system and we know everything on a blockchain is true accurate and complete information and it's not been hacked or kind of modified maliciously in any way now going a bit further blockchains are used in cryptocurrencies like ethereum bitcoin and many other cryptocurrencies that you would know and the way they work is they're a digital ledger of all of the transactions that have occurred in this cryptocurrency's history now this ledger is distributed to all of the different computers that are sitting on the blockchain network so you may have heard of the term miners before these are really computers that are sitting on the blockchain and they store a copy of this digital ledger so every single computer that's on for example the ethereum network has a copy of the ethereum blockchain and this makes it very very hard for someone to actually maliciously change or send a malicious transaction on the blockchain now the way that works is if someone wanted to actually send something through on the blockchain that was inaccurate was false was some malicious type of transaction or they wanted to modify some block or something they would need to actually do that on almost all of the computers that are on the blockchain because every blockchain is storing or sorry every computer is storing a copy of the blockchain so if you were to send through a malicious transaction it'd be very easy to detect because all of these other computers on the blockchain would say hey i don't have that transaction here that's not accurate we're not going to include that on the blockchain get rid of it now obviously i'm oversimplifying here but that's really the basics of how a blockchain works and that's why we call it decentralized because it's a distributed ledger across all of the computers on the network on the blockchain network and that means we can trust that everything on the blockchain is correct because there's not one centralized organization entity power government whatever controlling what goes on the blockchain it's a peer right or it's a group of computers all around the world sitting on the blockchain network so to end off this section i'll just say that the complete opposite of something like a blockchain would be something like a bank right a bank also has a ledger of transactions it keeps the balances of different accounts that are with that bank however this is all controlled by a central organization there's not a large group or a large network of computers or random people around the world controlling this it's one central institution and maybe this institution is backed by a government or something like that but that means you cannot be guaranteed that there won't be any malicious activity or stuff going on with the transactions occurring because there's only one entity controlling this it is centralized not decentralized so before moving forward i just want to quickly talk to you about some of the main advantages of decentralization now really the core advantage is you never have to worry about trust you never have to put your trust in a central organization institution government whatever it may be and that is really just a great thing because you know the famous saying goes absolute power corrupts absolutely and we can look in history and see lots of examples where a large institutional organization has been corrupted has been malicious and wasn't actually able to be trusted and you can go and look at a lot of other countries and see what they've done with their currency mass inflation stealing from the people go on you can find all kinds of examples but that's really the core advantage of decentralization is there's no need to trust i don't have to put my trust in you you don't have to put your trust in me we trust the entire network as a whole because it's next to impossible for any central entity organization to go in there and be malicious and do something fraudulent that is the advantage of decentralization and that's really the whole reason why cryptocurrency has become super popular especially in a lot of parts in the world where they cannot trust their government or cannot trust a banking organization or maybe don't even have access to that so finally we can start talking about d apps otherwise known as decentralized applications now d apps are really just decentralized apps that's all they are that means they use some type of blockchain technology and we can trust all of the code associated with this application because it's completely open source it never has any downtime and once it's added to the network it cannot be removed modified or changed so just like transactions we know we can trust when they're on the blockchain we know we can trust all of the code that's on the blockchain because we can see it ourself we know it cannot be changed or modified and we know it's never just going to disappear because the blockchain is always available the blockchain never goes down i won't explain that too much more but that's pretty much how it works now what is a smart contract well a smart contract as i was kind of alluding to is just code sitting on the blockchain it can be executed by the blockchain and you can think of it kind of like a set of rules the most basic example of a smart contract is something that allows you to exchange one coin for another so the best analogy that i've actually found for a smart contract is something like a vending machine so a vending machine stores money and it stores you know some type of goods right in this case maybe we'll say it stores chips or food or whatever if you give the correct amount of money to the vending machine you always get the good that you are looking for if you give too much money it gives you change no matter what it always works a smart contract is exactly the same way just like you might have your own ethereum wallet you can actually have ethereum stored in your smart contract or maybe some other type of good or service or coin or whatever it may be and every time you give certain input to this smart contract you always get the same output it can never be changed it's not malicious you can't go in and modify it or hack it and that is how we can trust applications that are on the blockchain because they are decentralized they work just like when i send you a coin on the blockchain so hopefully that's a decent enough explanation but you use smart contracts to add executable code to the blockchain and then that code is used by an application 8d app and that is why you know you can trust the application that you're using because it's distributed on the blockchain so what i just said sounds great and you're probably wondering why everyone doesn't just go use decentralized applications or actually make decentralized applications but the reason why is because there's a lot of disadvantages as well now the largest disadvantage with decentralized applications is the cost it just costs you a lot of money a lot of cryptocurrency to actually be able to run a decentralized application not only do you need to upload the smart contract to the blockchain that costs you money and transaction fees then you also need to use the smart contract make calls on the smart contract which costs you transaction fees and then if you want to store any information on the blockchain that's going to cost you money and it just is very very expensive even storing very small amounts of data on the blockchain can cost you literally hundreds if not thousands of dollars and well it doesn't make sense for a lot of companies or applications to use this because of the extremely high fees now some of the other main disadvantages of decentralized applications include the high latency it can take a lot of time to send transactions or upload new smart contracts poor user experience inability to manage a ton of private keys and wallets and all the other data that you need right now it's just not the best experience for developers fortunately though the sponsor of this video which is cartesi is trying to help that they have a bunch of different solutions you can check them out from the link in the description to lower the cost associated with creating decentralized applications and remove a lot of those headaches but still there's a lot of disadvantages even using some of these great solutions provided by companies like cartesi so as i was saying there is a lot of disadvantages and problems with decentralized applications however there is different types of solutions that can be implemented to make them more cost efficient and to make them have a lower latency now those solutions are categorized into layer 1 solutions and layer 2 solutions now layer 1 solutions use the underlying block chain technology so a layer 1 solution would be just using ethereum or using bitcoin using the actual cryptocurrency or blockchain itself now one solution within the layer one solutions is something called sharding now what sharding is is kind of splitting up all of the code or all of the you know aspects of a decentralized application into things called shards and then distributing that on the blockchain network such that it gets executed faster and you don't need to wait for say an entire massive large piece of code to be executed instead you have you know 20 or 30 pieces of code that are being executed or 20 or 30 shards that need to be you know run through the network and so you can kind of split this up and things can go a lot faster just like what would happen if you say split your application into multiple threads or multiple cores so that's one solution layer one solution called sharding that can kind of increase the speed and cost effectiveness sorry of using blockchain however then you have layer two solutions now layer 2 solutions are typically more advanced and what they are is actually a technology or system that lies above the underlying block chain technology so an example of a layer 2 solution would be something like a state channel now a state channel is pretty complicated to explain but really it's a way that two users can communicate without using the blockchain in the way in which the blockchain would work a little bit confusing but it's like using the blockchain just not using the blockchain such that you don't have to pay the huge latency and cost associated with the blockchain so what happens is two users will communicate with each other using this state channel and then once the communication is done or the transaction is complete only then will it be uploaded to the blockchain so rather than say having a thousand microtransactions occurring on the blockchain you have those occur in the state channel and then those get wrapped into one larger transaction which then gets uploaded onto the blockchain again the purpose of that is to lower the latency and to make sure that you're not going to have to pay massive fees for all of the different transactions that are going through now in this video i'm not going to explain exactly how these solutions work i'm just trying to give you an idea of what's kind of going on out there and how people are trying to mitigate the disadvantages of the blockchain so these solutions as i stated them do still make sure that the trust is secure they use very advanced math and cryptography to make sure that everything is all good but those are just two examples of a layer one and a layer two solution and how you can kind of mitigate some of those disadvantages of the blockchain so i'm gonna start wrapping up the video here by just giving you two examples of decentralized applications so that you can kind of read about them and check them out for yourself so the first application is something called the uniswap now uniswap is a decentralized finance protocol so it's called d5 and this allows you to actually exchange cryptocurrencies for each other so this is a d app you can look up uniswap and kind of see how it works if you want to learn more about it but another more interesting one that was actually developed by cartesi using some of their solutions is called haudelum poker so hodl hodl is kind of the term in cryptocurrency for holding your coins no matter what never selling them so it's kind of a punny name in that sense but this is an implementation of poker texas hold'em in which it's actually decentralized so you don't have to worry about trusting some large poker organization or website there's actually a lot of history of poker websites and poker players specifically cheating and scamming other people in this case you just trust the blockchain and this allows you to play poker without worrying about you know being scammed or fraud or people seeing your cards or mixing up the shuffle whatever it may be so i'll leave a link to that game in the description there's a great video by cartesi that explains kind of how that works that you can check out but i think with that i'm going to end the video here so as i mentioned i did team up with cartesi to create this video they helped me come up with a lot of the content that i shared here they're the true blockchain and cryptocurrency experts well you should check them out from the link in the description they provide a lot of layer one and layer two solutions to help create d apps decentralized applications and really mitigate some of those disadvantages that i talked about before look for some more videos coming from them in the future related to actually creating d apps and let me know what you thought of this video in the comments down below with that said like the video if you enjoyed subscribe to the channel and i will see you in another one youhello everybody and welcome to another youtube video so in today's video i'm going to be talking about blockchain technology and d apps otherwise known as decentralized applications now i want this video to act as a high level introduction to decentralized applications and how you can use blockchain technology to actually create apps now the reason i'm making this is because recently there's been a lot of hype around cryptocurrency but a lot of people look at cryptocurrency and blockchain in general and think that's only a way to make money they treat it simply as an investment and something that they can trade almost like a stock however there's a completely different side of cryptocurrency which is the development side well that's what this video is going to focus on so in this video i'm going to talk to you about what a blockchain is what decentralization is what a d app is and then the pros and cons of a d-app and some of the different solutions that companies are implementing to create d-apps however before we go any further i do need to mention that i myself am not a cryptocurrency or blockchain expert and that's why for this video i teamed up with a company called cartesi which helped me shape a lot of the content in this video now cartesia is a company that's dedicated to making the blockchain and cryptocurrency more accessible to developers like you and i they have a ton of different products and solutions that allow the blockchain to be more affordable to use easier to use and they just provide a bunch of tutorials resources and really cool products and you can check them out from the link in the description now they also are the sponsor of this video i'll likely be working with them in the future to create in-depth tutorials on how to actually make decentralized applications but as i said in this video it's just going to be a high level overview on how d apps work so let's go ahead and get started so before we get into decentralized applications the first thing you need to understand is what a blockchain is so i'll give you a simple definition here a blockchain is a system of storing information that makes it extremely difficult or impossible to hack cheat or change so generally speaking we can trust this system and we know everything on a blockchain is true accurate and complete information and it's not been hacked or kind of modified maliciously in any way now going a bit further blockchains are used in cryptocurrencies like ethereum bitcoin and many other cryptocurrencies that you would know and the way they work is they're a digital ledger of all of the transactions that have occurred in this cryptocurrency's history now this ledger is distributed to all of the different computers that are sitting on the blockchain network so you may have heard of the term miners before these are really computers that are sitting on the blockchain and they store a copy of this digital ledger so every single computer that's on for example the ethereum network has a copy of the ethereum blockchain and this makes it very very hard for someone to actually maliciously change or send a malicious transaction on the blockchain now the way that works is if someone wanted to actually send something through on the blockchain that was inaccurate was false was some malicious type of transaction or they wanted to modify some block or something they would need to actually do that on almost all of the computers that are on the blockchain because every blockchain is storing or sorry every computer is storing a copy of the blockchain so if you were to send through a malicious transaction it'd be very easy to detect because all of these other computers on the blockchain would say hey i don't have that transaction here that's not accurate we're not going to include that on the blockchain get rid of it now obviously i'm oversimplifying here but that's really the basics of how a blockchain works and that's why we call it decentralized because it's a distributed ledger across all of the computers on the network on the blockchain network and that means we can trust that everything on the blockchain is correct because there's not one centralized organization entity power government whatever controlling what goes on the blockchain it's a peer right or it's a group of computers all around the world sitting on the blockchain network so to end off this section i'll just say that the complete opposite of something like a blockchain would be something like a bank right a bank also has a ledger of transactions it keeps the balances of different accounts that are with that bank however this is all controlled by a central organization there's not a large group or a large network of computers or random people around the world controlling this it's one central institution and maybe this institution is backed by a government or something like that but that means you cannot be guaranteed that there won't be any malicious activity or stuff going on with the transactions occurring because there's only one entity controlling this it is centralized not decentralized so before moving forward i just want to quickly talk to you about some of the main advantages of decentralization now really the core advantage is you never have to worry about trust you never have to put your trust in a central organization institution government whatever it may be and that is really just a great thing because you know the famous saying goes absolute power corrupts absolutely and we can look in history and see lots of examples where a large institutional organization has been corrupted has been malicious and wasn't actually able to be trusted and you can go and look at a lot of other countries and see what they've done with their currency mass inflation stealing from the people go on you can find all kinds of examples but that's really the core advantage of decentralization is there's no need to trust i don't have to put my trust in you you don't have to put your trust in me we trust the entire network as a whole because it's next to impossible for any central entity organization to go in there and be malicious and do something fraudulent that is the advantage of decentralization and that's really the whole reason why cryptocurrency has become super popular especially in a lot of parts in the world where they cannot trust their government or cannot trust a banking organization or maybe don't even have access to that so finally we can start talking about d apps otherwise known as decentralized applications now d apps are really just decentralized apps that's all they are that means they use some type of blockchain technology and we can trust all of the code associated with this application because it's completely open source it never has any downtime and once it's added to the network it cannot be removed modified or changed so just like transactions we know we can trust when they're on the blockchain we know we can trust all of the code that's on the blockchain because we can see it ourself we know it cannot be changed or modified and we know it's never just going to disappear because the blockchain is always available the blockchain never goes down i won't explain that too much more but that's pretty much how it works now what is a smart contract well a smart contract as i was kind of alluding to is just code sitting on the blockchain it can be executed by the blockchain and you can think of it kind of like a set of rules the most basic example of a smart contract is something that allows you to exchange one coin for another so the best analogy that i've actually found for a smart contract is something like a vending machine so a vending machine stores money and it stores you know some type of goods right in this case maybe we'll say it stores chips or food or whatever if you give the correct amount of money to the vending machine you always get the good that you are looking for if you give too much money it gives you change no matter what it always works a smart contract is exactly the same way just like you might have your own ethereum wallet you can actually have ethereum stored in your smart contract or maybe some other type of good or service or coin or whatever it may be and every time you give certain input to this smart contract you always get the same output it can never be changed it's not malicious you can't go in and modify it or hack it and that is how we can trust applications that are on the blockchain because they are decentralized they work just like when i send you a coin on the blockchain so hopefully that's a decent enough explanation but you use smart contracts to add executable code to the blockchain and then that code is used by an application 8d app and that is why you know you can trust the application that you're using because it's distributed on the blockchain so what i just said sounds great and you're probably wondering why everyone doesn't just go use decentralized applications or actually make decentralized applications but the reason why is because there's a lot of disadvantages as well now the largest disadvantage with decentralized applications is the cost it just costs you a lot of money a lot of cryptocurrency to actually be able to run a decentralized application not only do you need to upload the smart contract to the blockchain that costs you money and transaction fees then you also need to use the smart contract make calls on the smart contract which costs you transaction fees and then if you want to store any information on the blockchain that's going to cost you money and it just is very very expensive even storing very small amounts of data on the blockchain can cost you literally hundreds if not thousands of dollars and well it doesn't make sense for a lot of companies or applications to use this because of the extremely high fees now some of the other main disadvantages of decentralized applications include the high latency it can take a lot of time to send transactions or upload new smart contracts poor user experience inability to manage a ton of private keys and wallets and all the other data that you need right now it's just not the best experience for developers fortunately though the sponsor of this video which is cartesi is trying to help that they have a bunch of different solutions you can check them out from the link in the description to lower the cost associated with creating decentralized applications and remove a lot of those headaches but still there's a lot of disadvantages even using some of these great solutions provided by companies like cartesi so as i was saying there is a lot of disadvantages and problems with decentralized applications however there is different types of solutions that can be implemented to make them more cost efficient and to make them have a lower latency now those solutions are categorized into layer 1 solutions and layer 2 solutions now layer 1 solutions use the underlying block chain technology so a layer 1 solution would be just using ethereum or using bitcoin using the actual cryptocurrency or blockchain itself now one solution within the layer one solutions is something called sharding now what sharding is is kind of splitting up all of the code or all of the you know aspects of a decentralized application into things called shards and then distributing that on the blockchain network such that it gets executed faster and you don't need to wait for say an entire massive large piece of code to be executed instead you have you know 20 or 30 pieces of code that are being executed or 20 or 30 shards that need to be you know run through the network and so you can kind of split this up and things can go a lot faster just like what would happen if you say split your application into multiple threads or multiple cores so that's one solution layer one solution called sharding that can kind of increase the speed and cost effectiveness sorry of using blockchain however then you have layer two solutions now layer 2 solutions are typically more advanced and what they are is actually a technology or system that lies above the underlying block chain technology so an example of a layer 2 solution would be something like a state channel now a state channel is pretty complicated to explain but really it's a way that two users can communicate without using the blockchain in the way in which the blockchain would work a little bit confusing but it's like using the blockchain just not using the blockchain such that you don't have to pay the huge latency and cost associated with the blockchain so what happens is two users will communicate with each other using this state channel and then once the communication is done or the transaction is complete only then will it be uploaded to the blockchain so rather than say having a thousand microtransactions occurring on the blockchain you have those occur in the state channel and then those get wrapped into one larger transaction which then gets uploaded onto the blockchain again the purpose of that is to lower the latency and to make sure that you're not going to have to pay massive fees for all of the different transactions that are going through now in this video i'm not going to explain exactly how these solutions work i'm just trying to give you an idea of what's kind of going on out there and how people are trying to mitigate the disadvantages of the blockchain so these solutions as i stated them do still make sure that the trust is secure they use very advanced math and cryptography to make sure that everything is all good but those are just two examples of a layer one and a layer two solution and how you can kind of mitigate some of those disadvantages of the blockchain so i'm gonna start wrapping up the video here by just giving you two examples of decentralized applications so that you can kind of read about them and check them out for yourself so the first application is something called the uniswap now uniswap is a decentralized finance protocol so it's called d5 and this allows you to actually exchange cryptocurrencies for each other so this is a d app you can look up uniswap and kind of see how it works if you want to learn more about it but another more interesting one that was actually developed by cartesi using some of their solutions is called haudelum poker so hodl hodl is kind of the term in cryptocurrency for holding your coins no matter what never selling them so it's kind of a punny name in that sense but this is an implementation of poker texas hold'em in which it's actually decentralized so you don't have to worry about trusting some large poker organization or website there's actually a lot of history of poker websites and poker players specifically cheating and scamming other people in this case you just trust the blockchain and this allows you to play poker without worrying about you know being scammed or fraud or people seeing your cards or mixing up the shuffle whatever it may be so i'll leave a link to that game in the description there's a great video by cartesi that explains kind of how that works that you can check out but i think with that i'm going to end the video here so as i mentioned i did team up with cartesi to create this video they helped me come up with a lot of the content that i shared here they're the true blockchain and cryptocurrency experts well you should check them out from the link in the description they provide a lot of layer one and layer two solutions to help create d apps decentralized applications and really mitigate some of those disadvantages that i talked about before look for some more videos coming from them in the future related to actually creating d apps and let me know what you thought of this video in the comments down below with that said like the video if you enjoyed subscribe to the channel and i will see you in another one you\n"