Today, we commonly refer to three layers of DLT. They form the basic structure for the various blockchain projects and all have a wide variety of functions. From the best-known use case like a blockchain to scaling solutions and up to the interconnection of different networks.
Firstly there is Layer 1 which is composed of the most widely known example of DLT, that is, blockchains. Their core functionality is to provide a distributed consensus procedure to ensure that transactions have occurred in a valid order. However, Layer 1s do not communicate well with one another, so each relies upon their ability to capture and tie to themselves various projects as captive clients. The most successful under these are Ethereum (ETH) and Bitcoin (BTC).
Secondly there are the Layer 2's that collate transactions and then use a Layer 1 to provide a consensus confirmation, notarising a large number of transactions as one. Further this kind of transaction processing is called batching and does create a ledger, but it isn't decentralised. Layer 2 services are centralised and therefore demand considerable trust on the user's part. Their main goal of these protocols for this reason is to solve the transaction speed and scaling issues faced by major cryptocurrency networks. Two very important examples of Layer 2 solutions are the Bitcoin Lightning Network and the Ethereum Plasma.
Last but not least there is the infrastructional Layer which is normally known as Layer 0. It is the base upon which all things can be built without having to concern ourselves with writing code to comply with every network. It enables the DLT functions to fall away from sight and become an operative resource pool. Interoperability allows users to enjoy the best features and services from the networked Layer 1 protocols, with none of the downsides. The impact of adding more protocols when you have interoperability is not to add complication. Rather, it adds scale - the capacity of each networked protocol adds to the whole.
