Is Layer 3 the Next Leap in Blockchain Scalability?

When you look at how far blockchain has evolved, you can’t help but draw the parallels between it and the early days of the internet. Imagine streaming a 4 K video or playing an online game at 56 Kbps. Think of how slow that would be. It wouldn’t be possible to execute. But now, you can stream 4k movies, game online, and even sync files to the cloud in the blink of an eye because we have faster and smoother tech. That’s exactly how the blockchain world has transformed to Layer 3.  

Blockchain has evolved from the core Layer 1 to the scaling Layer 2, and now to the application-specific Layer 3, which has taken scalability to a whole new level. While Layer 1 focuses on security, consensus, and data availability, and Layer 2 on scaling transactions cheaper, Layer 3 allows for custom execution. Is the coming of Layer 3 complicating things, or is it the next leap in Blockchain evolution for scalability? Let’s find out.

The Practicality and Evolution of Blockchain 

The early days of blockchain focused on security and decentralization. Then, Layer 1 was all about the fundamentals – executing on-chain transactions through a consensus mechanism and acting as a public ledger for confirmation. However, something happened – users and developers clamored for improvements. They couldn’t tolerate the expensive gas fees and network congestion, which spiked gas prices. Moreover, transactions took time to complete. Then came Layer 2, the scaling layer.

Layer 2 solutions provided a big relief for users and developers. They are built on top of Layer 1s, which means they inherit certain traits, like security and decentralization. However, what made Layer 2 special is it made transactions much quicker and cheaper. For instance, Layer 1 blockchains like Ethereum average 15 transactions per second (TPS), with gas fees hitting as high as $10 during network congestion. With Layer 2 solutions, like Optimistic Rollups, TPS was around 2000, and transaction costs dropped to $0.50 or even less sometimes. 

However, Layer 2 provided limited scalability and interoperability. It can only work with certain chains. Besides, Layer 2 scaling solutions didn’t provide the customizability that developers craved. Demand changed from wanting faster and cheaper transactions to specificity and customizability. This is how Layer 3 solutions emerged. 

Layer 3 Explained

Layer 3 is app-specific protocols built on top of Layer 2. Rather than being general-purpose like Layer 2, L3s focus on specialized needs. If, as a developer, you want to build a custom app for strictly gaming or payment, L3s can help you achieve that. They help Ethereum handle more complexity, which L2s are inequipped to solve. 

Just as Layer 2 is built on top of Layer 1 and leverages its security and decentralization, L3s use L2’s infrastructure. However, they focus more on specialized environments. They rely on the security and scaling features of L2s. 

Some examples of Layer 3 solutions are: Polygon CDK, Cosmos-IBC, Arbitrum Orbit, zkSync Hyperchains, Degen Chain, and Starknet AppChains. Each solution focuses on a particular use case. For instance, Cosmos-IBC focuses on cross-chain assets, while Degen Chain focuses on Gaming and NFTs.

Why Does Layer 3 Matter?

You may ask, “Why do we need Layer 3 when Layer 2 practically handles all the scalability issues?” Just as we mentioned, Layer 2s are general-purpose. They allow apps to scale faster, but they can’t be used for customization. Industries, like healthcare, sports, supply chain, and e-commerce, need more than just scalability. They need specialized applications tailored to their needs. Besides, L2s have limited interoperability, as they can’t do enough to make different blockchains communicate seamlessly. 

L3s solve the limitations of L2s. They can compress transactions before passing them to L2, making the process less expensive. This is paramount for high-volume applications, like games and payments. They can create specific applications tailored to a particular use case. For instance, you can use L3s to develop a blockchain application for a hospital where patients’ records are logged. That means all the patients the hospital has ever attended to will have their records stored. 

In summary, Layer 3 is needed for the following reasons:

• Improved communication between blockchains: Data can be shared across multiple chains. Let’s say your business uses various networks – one for supply chain and another for DeFi payments – L3s can unify them, making data sharing seamless.
• Tailored performance/customization: L3s can help you create specific chains that suit your needs and demands. You create apps for specific use cases, like gaming or DeFi, without sacrificing performance.
• Enhanced scalability: With transactions and tasks executed off the main chain and L2, congestion will be limited. Moreover, transaction costs will be lower, and users won’t have to wait long for their transactions to be completed. It’s a near-instant settlement.
• Sovereignty: L3s allow apps to have more control over their environment. Additionally, upgrades are done swiftly, and you can make changes at any time without affecting other aspects of the app. 

Some Challenges Facing Layer 3s

As beneficial as Layer 3 is to the blockchain industry, they aren’t without issues. Let’s take a look at some of them.

• Security: Additional layers to an already stacked environment can make the entire ecosystem vulnerable to exploitation. L3s rely on L2s, which rely on L1s. That’s a long chain. Any loophole that’s exploited in any of the layers could affect the other corresponding layer. 
• Complex Setup: Operating an L3 can be complex for developers and users. With each layer added comes its complication. 
• Standardization: The L3 space is relatively young, but its thriving depends on the framework that enables interoperability standards. Without this, L3s may become fragmented and obsolete. 

Is Layer 3 the Next Level in Blockchain Scalability?

Many critics may argue that Layer 3 is overcomplicating things, adding another layer to an already stacked-up ecosystem. Some even label L3s as marketing gimmicks for companies to make more money. However, they are missing the big picture.

L3s aren’t overcomplicating things – they are saving money and allowing you to create specialized applications without thinking of security or decentralization. The base layers do the heavy lifting, while you sit there and design for your use case. It’s like a football team, where each player maintains his position. You don’t play the position of a goalkeeper because someone’s there. Likewise, you don’t play as a striker because the position has been assigned. With L3s, you focus on tailoring the app to your use case.

Besides, L3s are now more secure and compostable, thanks to Ethereum’s roll-up centric roadmap. Instead of standalone chains, L3s will become part of a unified scaling stack. Still complex, but the entire architecture is minimal. 

Final Say

Layer 2s gave us a major leap in blockchain scalability, but Layer 3s are taking us to the next level. Layer 3s could be the next-gen decentralized technology to deliver unmatched scalability and customizability. They address the issues that Layer 1s and Layer 2s failed to resolve. These specialized protocols could be key to massive blockchain adoption and drive the next wave of Web3.