Smart Contracts 101: How Do They Work With Layer 0 Blockchains?

Must read

Jeff Horseman
Jeff Horseman
Jeff Horseman got into journalism because he liked to write and stunk at math. He grew up in Vermont and he honed his interviewing skills as a supermarket cashier by asking Bernie Sanders “Paper or plastic?” After graduating from Syracuse University in 1999, Jeff began his journalistic odyssey at The Watertown Daily Times in upstate New York, where he impressed then-U.S. Senate candidate Hillary Clinton so much she called him “John” at the end of an interview. From there, he went to Annapolis, Maryland, where he covered city, county and state government at The Capital newspaper. Today, Jeff writes about anything and everything. Along the way, Jeff has covered wildfires, a tropical storm, 9/11 and the Dec. 2 terror attack in San Bernardino. If you have a question or story idea about politics or the inner workings of government, please let Jeff know. He’ll do his best to answer, even if it involves a little math.

Over the last decade, the cryptocurrency ecosystem has experienced rapid growth, with numerous innovative projects offering new ways to exchange digital assets and more. The constant development of blockchain infrastructure to support secure, scalable, and decentralized apps has driven this unrelenting innovation of crypto-based products.

The most notable example is the introduction of smart contracts. Smart contracts are self-executing programs that run on a blockchain. They were first introduced by Layer 1  network, Ethereum, and have since become a popular feature of many blockchain platforms.

Regular Layer 1 blockchains such as Ethereum are independent and self-sufficient systems capable of managing network security, transaction validation, and completion without external assistance. Nevertheless, this implies that the same network must handle several tasks, significantly slowing down performance.

However, Layer 0 networks such as Venom’s Masterchain, Cosmos, Polkadot, and Avalanche serve as the underlying network for blockchains. They comprise elements like network architecture, hardware, and validator nodes. Several Layer 1 blockchains can be created on top of them, allowing these Layer 1s to share the same underlying infrastructure and protocols. In this overview, we will explore smart contracts on Layer 0 blockchains.

What are Smart Contracts?

Smart contracts are self-executing lines of code that can automatically enforce agreement terms between two or more parties. They run on blockchains, which offer a decentralized and transparent approach to code execution and storage.

Smart contracts are built to be transparent, secure, and immutable, meaning they cannot be altered once executed. They also save costs since they eliminate the need for intermediaries and reduce the time and resources needed to fulfill an agreement.

The applications of smart contracts are far-reaching, including supply chain management, real estate, financial services, etc.

Overview of Layer 0 Blockchains

The first layer of all blockchain protocols is called a Layer 0 protocol. It connects smoothly with all other protocols to create interconnected value chains, providing a more reliable alternative than other layers.

Layer 0 is the most critical element in enabling blockchains and decentralized apps to achieve limitless scalability while preserving the highest censorship resistance and decentralization levels. Layer 0 networks address three critical Web3 development and adoption challenges — scalability trilemma, flexibility, and interoperability.

One of the main challenges for blockchain-based solutions is scalability. However, Layer 0 protocols can be applied to various use cases, such as data validation, digital currency wrapping, creating customized reward structures, etc. As the root layer, it enables cross-chain interoperability and compatibility with all Layer 1 protocols, including networks like Ethereum, Bitcoin, and Cardano.

Leveraging the Layer 0 protocol, operators can swiftly set up relay networks among numerous nodes. It offers a unique approach to addressing the blockchain ecosystem’s scalability issue without changing the fundamental protocols of existing blockchain networks.

Layer 0 protocols also enable users to create blockchain-based businesses and dApps, mint cryptos, and other digital assets, validate data sources and schemas, and create custom business logic and KPIs.

Importance of Smart Contracts on Layer 0 Blockchains

Smart contracts are an essential feature of blockchain technology and are particularly important on Layer 0 blockchains for several reasons:

Firstly, they allow complex financial and other types of transactions to be automated, eliminating banks, brokers, or other third parties. This creates a more efficient and transparent system for executing transactions.

Secondly, smart contracts can aid in lowering the possibility of fraud or transactional errors. Since smart contracts are executed automatically, they are less prone to human error or manipulation.

Thirdly, smart contracts on Layer 0 blockchains provide high security. Since smart contracts run on blockchain networks, they are hack resistant and immune to other malicious attacks.

Lastly, smart contracts on Layer 0 blockchains provide interoperability between different Layer 1 blockchain networks. This allows for the seamless execution of transactions across various networks, creating a more integrated and efficient blockchain ecosystem.

Smart contracts are a critical feature of Layer 0 blockchains, enabling transactions’ automation, security, and efficiency while reducing the need for intermediaries.

Understanding Layer 0 Blockchains

Let’s delve deeper into Layer 0 blockchains.

Layer 0 Blockchains and their Characteristics

The base-layer protocols, commonly referred to as Layer 0 blockchains, are what underpin the blockchain network. As a result, higher-level protocols and applications, such as DeFis, NFTs, and other blockchain-based apps, are built on top of these blockchains.

Characteristics of Layer 0 blockchains include:

Security and Consensus mechanism: Layer 0 blockchains deliver the fundamental security of the blockchain network. The consensus mechanism, the process by which all network nodes agree on transactions’ validity, is kept up-to-date by Layer 0 blockchains. Layer 0 blockchains often use a consensus mechanism, such as proof-of-work (PoW), proof-of-stake (PoS), or a combination of both, to guarantee transaction validity and avoid double-spending. This consensus mechanism ensures network security and reliability.

Smart contract execution: Layer 0 blockchains execute smart contracts — self-executing programs that automate transactions and other processes. These contracts are an essential feature of blockchain technology.

Native currency: Most Layer 0 blockchains have a native cryptocurrency that rewards network participants and supports on-chain transaction fee payments.

High degree of decentralization: Layer 0 blockchains are intended to be decentralized, meaning no organization controls the network. Because of this decentralization, the network is protected against censorship and attacks.

Performance and scalability: The maximum number of transactions the network can handle is determined by Layer 0 blockchains. They play a critical role in the blockchain’s scalability as the Layer 0 blockchain’s capacity limits the network’s throughput. Large amounts of transactions (per second) can be handled by Layer 0 blockchains while still ensuring the security and reliability of the network.

Flexibility: Layer 0 blockchains define the fundamental protocols and rules for the blockchain network. They decide on the network architecture, block size, and transaction format. As a result, they consequently have a significant impact on the blockchain network’s adaptability and flexibility.

Interoperability: Layer 0 blockchains support cross-chain interoperability, facilitating communication and information exchange between various blockchain networks. The development and adoption of blockchain technology depend on this feature.

Comparing Layer 0 Blockchains with Other Blockchain Layers

A blockchain network can be divided based on protocol. Protocol refers to a network’s set of rules that govern it. There are four layers in the blockchain protocol: Layer 0, Layer 1, Layer 2, and Layer 3. Let’s examine each of these categories. 

A Layer-0 blockchain serves as the network architecture for the blockchain ecosystem.  They consist of the infrastructure layer of the blockchain ecosystem (the hardware, protocols, connections, and other elements that form the foundation of a blockchain ecosystem). You could think of this layer as a “network of blockchains.”

In addition, Layer 0 enables inter-chain operability or cross-chain interoperability, allowing communication across blockchains. Furthermore, Layer 0 protocols enable cross-chain transactions across Layer 1 blockchains. They offer a crucial framework for tackling future layer scalability issues. Also, Layer 0 frequently uses a native token to promote network participation and development. Some examples include Venom’s Masterchain, Cosmos, Polkadot, and Avalanche.

Layer 1 blockchains contain the blockchain ecosystem’s data, network, and consensus layers. They execute data transfer using the L0 infrastructure. Most of the tasks that maintain a blockchain network’s core functions, such as consensus mechanism, dispute resolution, programming languages, ledger systems, smart contract execution, token issuance, governance, etc., are carried out by Layer 1.

However, their scalability trilemma threatens a blockchain network’s true decentralization. Scalability issues usually arise because of the enormous number of tasks this layer must manage. As more users join a blockchain, the additional computational power needed to solve and add blocks to the chain leads to higher fees and longer processing times. Some examples include Venom’s Workchains, Bitcoin, Ethereum, Cardano, Solona, Tezos, and Algorand.

Solutions enabling a Layer 1 blockchain to scale without sacrificing its security or decentralization are called Layer 2 solutions. They mostly use the blockchain architecture’s application layer. A chosen Layer 1 blockchain serves as the foundation for Layer 2 solutions. Their function is to participate in Layer 1 transactions and process them off-chain to lighten the Layer 1’s workload.

The difference between Layer 1 and 2 is that Layer 1s validate transactions independently while Layer 2s depend on their Layer 1 to validate transactions. Layer 2 can be state channels (e.g., Bitcoin’s Lightning Network) or sidechains (e.g., Ethereum’s Polkadot).

Layer 3 is the last and most visible layer of the blockchain ecosystem. Network participants interact with the blockchain ecosystem using the Layer 3 user interfaces (UI). This layer seeks to provide simplicity and ease of use while interacting with L1 and L2.

Benefits of Using Layer 0 Blockchains for Smart Contracts

There are several benefits to using layer 0 blockchains for smart contracts, including:

High Scalability: Layer 0 blockchains are designed to handle high transaction volumes and can scale to support millions of transactions per second. This is particularly important for smart contracts requiring high processing power to execute.

Low Latency: Layer 0 blockchains can process transactions quickly, with low latency and high accuracy. This is important for smart contracts, which require fast and accurate execution to ensure the integrity of the contract.

Security: Layer 0 blockchains are designed to be highly secure, with a robust consensus mechanism that ensures the integrity of the network. This is critical for smart contracts, which involve the transfer of value and require a high degree of security to prevent fraud and hacking.

Flexibility: Layer 0 blockchains are highly flexible and support many use cases, including smart contracts. This means developers can create various smart contracts depending on their needs.

Interoperability: Layer 0 blockchains can be designed to be interoperable with other blockchains and traditional systems. This means smart contracts can interact with other systems, including blockchains, to create more complex and sophisticated applications.

Smart Contracts on Layer 0 Blockchains

Layer 0 blockchains are a relatively new development in the blockchain space, designed to offer improved scalability and performance over traditional blockchain architectures. These blockchains are built to provide a more efficient foundation for developing decentralized applications (dApps) and smart contracts, providing high throughput, interoperability, and scalability.

Overview of Smart Contracts on Layer 0 Blockchains

Smart contracts on Layer 0 blockchains are self-executing contracts with the terms of the agreement between parties written in code. Furthermore, smart contracts on Layer 0 blockchains offer a powerful tool for developing decentralized applications and the execution of complex transactions. They are stored on the blockchain, which makes them immutable and tamper-proof. These contracts execute automatically when the predefined conditions are met, eliminating the need for intermediaries and increasing the efficiency and speed of transactions.

Technical Aspects of Smart Contracts on Layer 0 Blockchains

Smart contracts on Layer 0 blockchains are implemented through a combination of programming languages, virtual machines, and blockchain protocols, allowing developers to leverage the unique features of these blockchains to create innovative smart contract applications that can execute complex transactions with speed and efficiency.

Programming languages: Smart contracts on Layer 0 blockchains can be developed using a variety of programming languages, depending on the blockchain platform. Some popular programming languages for writing smart contacts on Layer 0 blockchains include Solidity, Rust, and AssemblyScript.

Virtual machines: Smart contracts on Layer 0 blockchains execute on virtual machines, which provide a secure and isolated environment for executing code (e.g., Polkadot’s WebAssembly (Wasm) virtual machine and  Venom’s Threaded Virtual Machine (TVM)).

Blockchain protocols: Layer 0 blockchains use novel consensus algorithms to achieve high throughput and scalability. For example, Polkadot uses the nominated proof-of-stake (NPoS) consensus algorithm, while Venom uses the Proof of Stake (PoS) consensus mechanism with the Byzantine fault-tolerant (BFT) algorithm.

Gas fees: Smart contracts on Layer 0 blockchains typically require a fee to execute. These fees are known as gas fees and are paid in the native cryptocurrency of the blockchain. The gas fee incentivizes network validators to process the transaction and execute the smart contract.

How do Smart Contracts Work With a Layer 0 Protocol?

Take Venom blockchain, for example. Venom supports the development and execution of smart contracts. The programming language, Threaded Solidity, implements smart contracts in the ecosystem.

Venom’s Turing Complete Machine infrastructure, the Threaded Virtual Machine, offers developers a collection of pre-built components that they may use to build unique and optimized smart contracts tailored to particular use cases.

Venom’s smart contracts can be utilized to create various decentralized apps and automate the execution of complex contracts between participants. Interoperability with multiple blockchains is one of the main advantages of Venom’s smart contracts. This implies that Venom’s smart contracts can communicate with other blockchains, allowing developers to build more complex applications that integrate many blockchains.

Overall, Venom’s smart contracts offer developers a potent tool for creating secure, transparent, and efficient decentralized applications, which is advantageous for the entire blockchain ecosystem.

Advantages and Disadvantages of Using Smart Contracts on Layer 0 Blockchains

Smart contracts on Layer 0 blockchains offer several advantages and disadvantages compared to traditional smart contracts. Here are some of the main advantages and disadvantages of using smart contracts on Layer 0 blockchains:


  1. Layer 0 blockchains can process thousands of transactions per second, making them ideal for applications that require high throughput.
  2. Layer 0 blockchains are interoperable, which allows for the seamless transfer of data and value between different Layer 1s. This makes it easier for developers to create complex dApps that utilize multiple blockchains.
  3. Layer 0 blockchains offer improved scalability, which enables the development of more complex and sophisticated smart contracts.
  4. They are stored on the blockchain, which makes them immutable and tamper-proof. This provides a high degree of security and transparency for users.


  1. Developing smart contracts on Layer 0 blockchains can be more complex and challenging than creating smart contracts on other Layers.
  2. They require a gas fee to execute. These fees can be expensive, particularly during periods of high network congestion.
  3. Layer 0 blockchains are relatively new and may need more maturity and standardization in the ecosystem.
  4. Compared to Layer 1 smart contracts, limited tools and resources are available for developing and deploying smart contracts on Layer 0 blockchains.

Use Cases of Smart Contracts on Layer 0 Blockchains

Smart contracts on Layer 0 blockchains have the potential to revolutionize a wide range of industries and applications by enabling decentralized, trustless, and transparent interactions between parties. Here are some potential use cases of smart contracts on Layer 0 blockchains, their analysis, and their impact on the blockchain industry.

Decentralized Finance (DeFi): DeFi is currently one of the most significant use cases for smart contracts on blockchains. Smart contracts on Layer 0 blockchains enable the creation of various financial instruments such as lending and borrowing protocols, decentralized exchanges, stablecoins, and more. DeFi is already disrupting traditional finance, and smart contracts on Layer 0 blockchains will likely continue to play a crucial role in the growth and evolution of DeFi.

Supply Chain Management: Smart contracts on Layer 0 blockchains can streamline supply chain management by automating and verifying the flow of goods and payments. This can help reduce fraud and errors, as well as improve efficiency. 

Identity Verification: Smart contracts can be used to verify identities in a decentralized manner. This can help reduce the risk of identity theft and fraud. Identity verification is a critical component of many industries, and smart contracts on Layer 0 blockchains have the potential to make them more secure and efficient.

Other notable use cases include gaming and collectibles, intellectual property, and voting. 

Challenges and Future of Smart Contracts on Layer 0 Blockchains

Several challenges and future developments need to be addressed to maximize the potential of smart contracts on Layer 0 blockchains. Here are some of the challenges and future developments of smart contracts on Layer 0 blockchains:

Challenges Facing the Adoption of Smart Contracts on Layer 0 Blockchains

  1. Layer 0 blockchains face significant scalability challenges, especially as the network’s number of users and transactions grows. Smart contracts add more complexity to the network, making it even more challenging to scale.
  2. Smart contracts on Layer 0 blockchains are susceptible to bugs and vulnerabilities, which can lead to significant financial losses. 
  3. Interoperability between Layer 0 blockchains is currently a significant challenge, making it difficult for smart contracts to interact with each other across different blockchains.
  4. The user experience of interacting with smart contracts on Layer 0 blockchains can be complex and challenging for non-technical users. 

Future Developments and Potential Innovations in the Field

  1. Future developments like sharding, sidechains, and other scaling solutions like Venom Blockchain may address scalability challenges.
  2. Improving smart contract security through formal verification, auditing, and testing is crucial to mitigating risks.
  3. Future developments in cross-chain communication and interoperability protocols may help address interoperability challenges.
  4. Improving the user experience through better wallet interfaces, intuitive user interfaces, and educational materials can help drive adoption.


In conclusion, smart contracts have revolutionized how agreements are made and executed on blockchain networks. With the advent of Layer 0 blockchains such as Polkadot, Cosmos,  Venom’s Masterchain, etc., smart contracts have become even more efficient and versatile, allowing developers to create more complex decentralized applications. 

Layer 0 blockchains offer several advantages over their Layer 1 counterparts, such as faster transaction processing, interoperability, and customization of the consensus mechanism. As the blockchain industry continues to evolve, we expect to see further advancements in smart contract technology, which will undoubtedly bring about exciting new use cases and opportunities for innovation.

Latest article

More articles