What is a Layer 3 Crypto?
In this guide, we explore the concept "Layer 3" blockchains and applications that anchors onto Layer 2 protocols like Optimism and Arbitrum. Find out what they are and whether they are viable.
TLDR: Layer 3 (L3) is an upcoming layer in blockchain technology that provides additional scalability and customization for decentralized applications beyond Layer 2 (L2). L3 leverages the cost reduction and security benefits of L2 while offering hyper-scalability through recursive proving and improved privacy with zero-knowledge proofs.
What is a Layer 3?
Layer 3 is a concept in blockchain technology that builds upon the existing Layer 2 scaling solutions, aiming to further enhance scalability and functionality. According to Vitalik Buterin's paper titled "What kind of layer 3s make sense?", the idea of Layer 3 is not merely about stacking the same scheme on top of itself for exponential scaling, as simple conceptions often face unstackable design limitations. Instead, newer ideas around Layer 3 are more sophisticated, assigning different purposes to the second and third layers.
While Layer 2 focuses on scaling, Layer 3 may provide customized functionality such as privacy, specialized applications, or weakly-trusted scaling like validiums. These visions of Layer 3 are considered fundamentally reasonable, although the necessity of a three-layer structure over a two-layer model is still a complex question.
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Layer 2 vs Layer 3
Layer 2 and Layer 3 are integral components of the blockchain technology stack, each serving distinct purposes. Layer 2 focuses on scaling solutions that enhance the transaction capacity of the base layer (Layer 1), such as the Ethereum blockchain, by offloading some computational work. Some prominent examples of this are Arbitrum and Optimism, or zk L2's like zkSync.
Layer 3 refers to solutions that build on top of Layer 2, offering additional functionality and customization for specific use cases. These solutions can be designed for privacy, app-specific performance, or other purposes. For example, a Layer 3 solution could offer privacy-preserving transactions without including them in public Layer 2 solutions.
According to Starkware, a company of cryptographers working on zero knoweldge proofs, Layer 3 solutions are more sophisticated than just adding more scalability on top of Layer 2. Instead, they advocate for a layered approach where Layer 2 is for general-purpose scaling and Layer 3 is for customized functionality. The specific form of customization, such as specialized data compression or privacy systems, will depend on the use case.
What are the Best Layer 3 Cryptos?
Currently, there are no widely-adopted Layer 3 blockchains, as the concept is still in its early stages of development. However, Starkware is one of the leading companies working on developing Layer 3 solutions and fractal scaling, and their work is highly regarded in the crypto community. They have yet to release a token or any real-world implementations of their L3 technology, but their efforts are seen as some of the most promising in the space.
Bottom Line
Layer 3 in blockchain technology represents a sophisticated advancement beyond Layer 2, focusing on specialized functionalities and customizations rather than mere scalability. While Layer 2 aims to enhance transaction capacity by offloading computational work from the base layer, Layer 3 offers solutions tailored to specific needs such as privacy or app-specific performance
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