Scaling to the Max: What’s Happening on Blockchain’s Layer 3
As the number of scaling solutions grows, so does the demand for quality and applicability. In April 2024, Vitalik Buterin expressed scepticism toward Layer 3 (L3), suggesting there may be easier ways to achieve the same cost savings.
By September, Buterin urged Layer 2 (L2) protocol teams to “get things in order,” stating that starting next year, he will no longer publicly mention projects below the “Stage 1+” threshold. With this backdrop, the popularity of “L”-based solutions continues to spark debate within the community. Today, let’s find out how scaling is achieved using the highest level of customisation — Layer 3.
What Exactly Happens at the Blockchain Layers?
In addition to the fundamental levels, there are four blockchain layers: Layer 0 (L0), L1, L2, and L3. Each layer hosts unique solutions, but only L1 typically has a complete architecture, while the others primarily focus on scaling the network.
- Layer 0, the communication layer, provides the physical infrastructure (cables, data centres, nodes) or ensures cross-chain compatibility for building decentralised applications (dApps) on multiple blockchains simultaneously. In both cases, it creates the foundation for interoperability. Platforms like Cosmos and Polkadot parachains fall into this category. Due to their wide range of functions, these projects are also considered L1 and L3 networks.
- L1, or the base layer, hosts fully-fledged and independent blockchains like Solana and Ethereum. These blockchains ensure network security through consensus mechanisms such as Proof-of-Work (PoW) or Proof-of-Stake (PoS) while creating new blocks and completing transactions.
- In its current form, Ethereum relies heavily on a suite of scalability solutions known as Layer 2 (L2). Optimistic and ZK-rollups like OP Mainnet, Arbitrum, and Polygon have significantly reduced transaction costs for dApp users and increased processing speed.
Similar conceptual frameworks are applied to projects built on Bitcoin’s network, Bitcoin Layers. State channels, rollups, and sidechains help mitigate Bitcoin’s architectural limitations and enable programmable smart contracts like Ethereum. Projects like Rootstock, Merlin Chain, and BOB add DeFi capabilities while improving transaction speed and accessibility.
How Layer 3 Solutions Work?
Vitalik Buterin first mentioned Layer 3 (L3) in 2015 in the context of multi-tier blockchain scaling. Today, most Layer 3 solutions are built around the second-largest cryptocurrency network by market capitalisation. Layer 3 addresses the need for personalised dApp customisation on top of Layer 2 (L2) networks. Also known as the application layer, it is similar to Layer 0, but instead of providing cross-chain interoperability, it operates within existing blockchains. Customisation of specific projects enhances their functionality and improves overall performance.
Rollups, sidechains, and other L2 solutions have allowed Layer 3 blockchains to handle complex off-chain computations while maintaining high security and performance. By utilising protocols, cross-chain bridges, and customisable scalability, Layer 3 improves the efficiency of dApps in areas like decentralised finance (DeFi), GameFi, real-world assets (RWA), and decentralised social (DeSoc) platforms.
Some notable scalability solutions on Layer 3 include:
- Appchains: Appchains are built on any layer and explicitly designed for applications. StarkWare introduced the concept in the summer of 2024, aiming to address the specific needs of dApps in L3 networks. This solution increases transaction speed, reduces costs, and allows customised network configurations like block size and transaction finalisation options.
- Validiums: A Layer 3 component that uses off-chain transaction validation with zero-knowledge proofs (ZKP), Validiums offer scalability by reducing operational costs and time. They are suitable for applications that require high speed and efficiency but are willing to compromise on security.
- Optimiums: This solution represents an “optimistic” form of off-chain computation popular among L3 systems. It relies on fraud proofs for verification and requires additional trust, which makes it a favoured approach for optimising performance.
Ready Layer 3 Solutions
In September 2022, Vitalik Buterin discussed the role of Layer 3 (L3), suggesting that L3 solutions are not directly for scaling but for providing “customised functions” for Layer 2 (L2). He was right, as major L2 networks now offer comprehensive tools like OP Stack, Arbitrum Orbit, and ZK Stack for building niche blockchains and dApps tailored to specific needs.
As of September 2024, zkLink Nova leads the L3 sector with over $164 million in total value locked (TVL), providing scalability and cross-chain compatibility through zkLink Nexus. Arbitrum Orbit, launched in 2023, supports 16 GameFi and DeFi projects, with Sanko, an NFT and gaming platform, being the top player.
Other notable L3 projects include:
- Degen Chain, developed by Syndicate for the Degen community, launched in 2024 with some technical setbacks but remains active with ~$2.5 million TVL.
- Xai, designed for gaming apps, offers reduced fees and account abstraction (AUA), which simplifies user registration. It ~ has $1.9 million TVL.
- OP Stack (Superchain) will expand in 2024 to support L3 with custom gas tokens and off-chain DA providers, enabling custom dApps like B3 for gamers.
- Matter Labs’ ZK Stack (Hyperchains) enables interconnected blockchains using ZKP. Teva Chain is the first of its kind aimed at the gaming industry.
- The hybrid crypto exchange GRVT will launch in Q4 2024. It combines a CEX interface with non-custodial asset storage.
Conclusion
According to L2beat, more than 15 Layer 3 (L3) solutions are set to launch soon, covering a wide range of applications from gaming and music to DeFi and IoT. L3 networks offer creators the ability to enhance dApp performance with faster transactions and lower fees. However, the security of these networks largely depends on the underlying layers and third parties involved in asset transfers, which requires users to assess the reliability of the solutions they choose carefully.
About Concordex
Concordex is a cutting-edge Decentralised Exchange (DEX) that operates on the Concordium Blockchain. Renowned for emphasising institutional-grade security, transparency, and user-centric design, Concordex offers various services, including staking, swapping, and perpetual trading. With a mission to bridge the divide between traditional finance and decentralised systems, it offers users an unparalleled trading environment.
