Layer 1 smart contracts

Even though computation and settlement can be run on both layers , as evidenced by the feature-packed layer 1 smart contract capabilities, computationally-intensive dApps are discharged to Algorand’s off-chain layer (L2) to prevent bottlenecks from materializing.

Algorand is an open-source, decentralized blockchain network that leverages a two-tiered structure and a unique variation of the Proof-of-Stake (PoS) consensus mechanism to increase transaction speeds and achieve finality.

This means that every smart contract is directly adding traffic to the network, and too many of them can slow the network down. In order to avoid that, Algorand offers layer-2 smart contracts as well , where the contract will be executed “off-chain”.