Layer 1 and Layer 2 scaling solutions are distinct approaches to addressing the scalability challenges of blockchain technology, each offering unique advantages and functionalities.

Layer 1, often referred to as the base layer, encompasses the core blockchain protocol itself. It includes fundamental components such as consensus mechanisms, block creation, and transaction validation. Layer 1 solutions aim to improve scalability by directly modifying the underlying blockchain protocol, such as increasing block size, optimizing transaction processing speed, or implementing sharding techniques. Examples of Layer 1 scaling solutions include Bitcoin's Segregated Witness (SegWit) upgrade and Ethereum's transition to Ethereum 2.0 with a proof-of-stake (PoS) consensus mechanism.

In contrast, Layer 2 scaling solutions build on top of Layer 1 and offer supplementary frameworks or protocols that enable off-chain processing of transactions. Layer 2 solutions aim to alleviate congestion on the main blockchain by conducting transactions off-chain and settling them periodically on the main chain. This approach can significantly increase transaction throughput and reduce fees. Popular Layer 2 solutions include the Lightning Network for Bitcoin and various state channels for Ethereum.

Overall, while Layer 1 focuses on modifying the base blockchain protocol itself to improve scalability, Layer 2 solutions provide complementary frameworks that leverage the existing blockchain infrastructure to enhance transaction throughput and efficiency without fundamentally altering the underlying protocol.