What is actually meant by layers 1 and 2
Layer 1 is anything that occurs directly on the Hive blockchain. With respect to rewards, any rewards in HIVE or HIVE Power or HBD are Layer 1 rewards. Their issuance and distribution are governed by the code running on the Layer 1 nodes, which are controlled by the witnesses. It takes an affirmative vote by 17 of the top 20 witnesses to change that code.
Layer 2 is anything occurring "off chain". Within the context of my above comment, the Layer 2 solutions I am referring to occur on the Hive-Engine blockchain. Currently, H-E is the only active Layer 2 chain. However, the soon-to-be-launched SPK Network will provide another Layer 2 chain.
At the present, tokens on Hive are either the aforementioned Layer 1 tokens (HIVE, HIVE Power, HBD) or Layer 2 H-E tokens, like LEO, POB, STEM, BEE, APE, SWAP.HIVE, etc., etc.
With Layer 2 tokens, the creator of the token controls EVERYTHING associated with that token. As such, each token is 100% centralized. With that said, the token issuer can opt to implement a 'decentralized' governance structure. However, at any moment in time, the issuer of that Layer 2 token can unilaterally 'take back control' of everything associated with that token, except for a few token parameters that are 'set in stone' when the token is created, like the max supply.