TL;DR
- Layer 3 blockchains (L3s) refer to an emerging concept in the blockchain technology stack, building on the foundations of both L1s and L2s.
- L3s typically focus on customized use cases, such as application-specific chains or protocol ecosystems, to enhance usability, privacy, and scalability.
- Some of the most popular L3s include Orbs Network, XAI Games, zkLogin, DEGEN Chain, Dojo, and Lens Protocol.
Blockchain technology has come a long way since the introduction of Bitcoin in 2008. In the early days of decentralization, Layer 1 protocols like Bitcoin and Ethereum established the ecosystem’s foundational infrastructure. As demand grew, scalability issues led to the rise of Layer 2 solutions — systems like rollups and sidechains designed to increase Layer 1 output and efficiency.
Now, with both infrastructure and scalability in place, the focus is shifting to Layer 3: application-specific layers built on top of Layer 2, enabling richer functionality, interoperability, and custom user experiences.
In this blog, we’ll explore the following topics and more:
- Layer 1 blockchains: The base layer
- Layer 2 blockchains: Scaling solutions
- What are Layer 3 blockchains?
- Layer 3 blockchain examples
- Layer 3 blockchain functions
- Components of Layer 3 blockchains
- Benefits and challenges of Layer 3 blockchains
- The future of Layer 3 in blockchain
Layer 1 blockchains: The base layer
Layer 1 blockchains (L1s), often referred to as the base layers, form the foundational architecture on which other blockchain-based applications are built. L1s are responsible for the core functionality of blockchain technology, such as transaction processing, consensus mechanisms, and security, ensuring the decentralized nature and robustness of an entire system.
Some of the most popular blockchains are L1s, such as Bitcoin, Ethereum, Solana, BNB Chain, Avalanche, and Cardano.
Layer 2 blockchains: Scaling solutions
Layer 2 blockchains (L2s) are protocols built on top of L1s with the goal of enhancing network performance — typically by broadening scalability, reducing transaction costs, and increasing throughput. L2s help alleviate the congestion and limitations of base layers, enabling faster and more cost-effective transactions.
Some of the most popular L2s include the Lightning Network (built on top of Bitcoin), Stacks (on Bitcoin), Arbitrum (on Ethereum), and Optimism (on Ethereum).
What are Layer 3 blockchains?
Layer 3 blockchains (L3s) refer to an emerging concept in the blockchain technology stack, building on the foundations of both L1s and L2s. They typically focus on customized use cases, such as application-specific chains or protocol ecosystems, to enhance usability, privacy, and scalability. Additionally, Layer 3 networks aim to create customizable environments in which developers can build specialized decentralized applications (dApps).
Layer 3 blockchain examples
Currently, Layer 3 blockchains are in their early stages; thus, there aren’t many widely-recognized L3s. However, some blockchain-based projects are currently exploring their potential as L3 solutions:
- Orbs Network: A protocol that adds decentralized backend services to Ethereum and Ethereum’s L2s, enabling more complex applications like decentralized finance (DeFi) automation and custom logic.
- XAI Games: A gaming-focused L3 built on Arbitrum, designed to handle high-speed, low-cost in-game and non-fungible token (NFT) transactions.
- zkLogin: An L3 built on Sui that allows users to log in with Web2 credentials (such as a Google or Apple ID) while maintaining blockchain-level security.
- DEGEN Chain: A network built on top of Base that leverages high transaction throughput for microtransactions, often used for social network tokens.
- Dojo: An L3 built on top of Starknet that offers game engine infrastructure for on-chain games, leveraging Starknet’s zero-knowledge (ZK) scalability for real-time performance.
- Lens Protocol: An L3 that powers decentralized social networking by providing modular, app-specific infrastructure on top of existing chains.
Layer 3 blockchain functions
- Improving user experience: L3s simplify blockchain interactions, making it easier for users of all levels to engage with applications. For example, zkLogin lets users access blockchain applications with a Google or Apple account, removing the need for wallets or seed phrases.
- Interoperability between blockchain networks: L3s can act as bridges between different L1s or L2s, allowing apps to seamlessly interact across ecosystems. For instance, a Layer 3 social app could allow users to mint NFTs on Ethereum while using assets from Solana.
- Enablement of complex functions: L3s support advanced logic and real-time interactions that are typically too resource-intensive for the other layers. For example, a gaming L3 like XAI Games can handle thousands of in-game microtransactions without bogging down the base chain.
- Enhanced security and privacy: L3s offer additional security and privacy features to protect user data, often through using encryption or zero-knowledge proofs. For instance, a healthcare dApp could run on an L3 that keeps sensitive medical information private, even from the underlying chain.
- Customization and flexibility: Developers can create tailored solutions on L3s without altering the L1 or L2 blockchains involved. A DeFi protocol might launch its own L3 to fine-tune gas fees or governance rules for its community.
Components of Layer 3 blockchains
User Interfaces (UI) and User Experience (UX)
User interfaces (UI) and user experience (UX) are critical in blockchain, regardless of the layer, as they bridge the gap between complex technologies and everyday users. A well-designed UI or UX can demystify the underlying technology, making dApps more accessible and intuitive, which is essential for mainstream adoption.
Interoperability protocols
Interoperability is a key component in the evolution of blockchain technology — particularly in L3 — where the goal is to create seamless connections between different networks. Without interoperability, blockchains would remain isolated, limiting their potential for growth and collaboration. For example, Hyperlane is an L3 that focuses on permissionless interchain communication for rollups.
Application-specific protocols
L3s are often designed for a single use case or category, such as gaming, social media, or DeFi, rather than serving as general-purpose platforms. By focusing on one use case, these L3s can optimize for performance, user experience, and features tailored to a specific vertical.
Benefits and challenges of Layer 3 blockchains
Layer 3 benefits
- Scalability and usability: L3s enhance blockchain performance by improving transaction speeds and reducing costs, making dApps more user-friendly and accessible.
- Flexibility for developers and users: L3s provide developers with tools to create customized solutions tailored to specific applications. The users themselves benefit from more personalized and efficient experiences.
- Improved cross-chain communication: L3s support interoperability between blockchains, allowing applications to leverage the strengths of multiple networks and fostering greater innovation across crypto ecosystems.
Layer 3 challenges
- Security concerns and vulnerabilities: L3s introduce additional layers of complexity, which can create new attack vectors and vulnerabilities.
- Implementation and maintenance complexities: Developing and maintaining L3s requires significant technical expertise, making it challenging for projects to ensure seamless integration and ongoing functionality.
- Compliance and regulatory issues: Navigating the evolving landscape of blockchain regulations can be difficult, especially for L3s that must ensure compliance across multiple jurisdictions and use cases.
The Future of Layer 3 in blockchain
Layer 3 solutions have the potential to transform blockchain by making decentralized applications faster, more user-friendly, and tailored to specific industries. As blockchain moves beyond infrastructure into real-world adoption, L3s will play a role in driving more mainstream usability. Whether it’s enabling seamless cross-chain apps, powering high-performance games, or creating social platforms that rival their Web3 counterparts, L3s are poised to unlock new blockchain innovations.
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