Different types of blockchains exist, the most popular ones being layer-1 (L1) and layer-2 (L2). This article, however, focuses on layer-3 (L3) blockchains. Read on to learn what they are and how they work.
Exploring Layer-3 Blockchains
A layer-3 network is a protocol built atop base layers to offer a customized solution to users’ specific needs. It is developed on the foundations of both layer-1 and layer-2 blockchains. Layer-3 networks are intended to improve functionality for DApps (decentralized applications) by addressing the limitations of L1 and L2 blockchains.
Typically, layer-2 networks scale layer-1 blockchains, whereas layer-3 networks link different blockchains, thus facilitating seamless communication between them.
Furthermore, layer-3 networks enable decentralized apps to interact, enhance transactions throughout, and allow developers to deploy smart contracts. DApps built on layer-3s enjoy advanced governance systems that facilitate effective decision-making.
Difference Between L1, L2, and L3
Layer-1 Blockchains
Layer-1 networks provide the fundamental architecture of an ecosystem. They don’t depend on other networks to operate. While transactions can be processed on layer-2 and layer-3 networks, they must be sent back to layer-1 networks to be finalized. For transaction validation, layer-1s use consensus algorithms like PoS (proof-of-stake) or PoW (proof-of-work).
Layer-1s are known to be secured. However, due to significant transaction volumes, they are unable to attain optimal performance, hence the need for layer-2s and layer-3s, which address scalability issues on layer 1s.
Layer-2 Blockchains
These networks are built on layer-1s’ foundations. They improve the functionality of the main blockchains, such as increasing transaction speed, reducing costs, and addressing interoperability problems without compromising on safety. Layer-2 networks can be sidechains, state channels, or rollups.
Layer-3 Blockchains
As mentioned, layer-3s are built using the technology of layer-1s and layer-2s. They boost scalability beyond L2s, enabling the development of tailored applications and higher transaction throughput. Moreover, transactions are cheaper on layer-3s than on layer-2s. This allows users to navigate through DApps cost-effectively.
Layer-3s also facilitate seamless interaction among various networks, thus unlocking investment opportunities in the DeFi (decentralized finance) space.
How Layer-3 Networks Work
Along with using the transactional capabilities of layer-1s and layer-2s, Layer-3s come with sophisticated features that enable them to perform complicated off-chain computation while ensuring the network’s security isn’t compromised.
Further, layer-3s use inter-blockchain communication apps to enable interactions between different blockchains, thus enhancing interoperability between DApps.
Regarding the creation of decentralized apps, layer-3 networks offer virtual machine environments that enable Web3 developers to build DApps with futuristic functionalities.
There is also a component called Validium that addresses scalability using zero-knowledge proofs. Validium allows layer-3s to reduce costs while improving transaction speeds.
Use Cases of Layer-3s
Layer-3 networks provide various use cases, including:
Gaming Applications
With their capacity to process significant transaction volumes per second, layer-3s offer gamers a seamless experience, considering that gaming apps frequently receive a lot of transaction requests from users.
DeFi Applications
Since layer-3s address interoperability, they allow different DeFi protocols to work together, thus boosting liquidity.
Enterprise Applications
Enterprise blockchains can capitalize on layer-3s’ ability to handle massive volumes of transactions within seconds to improve their transaction processing.
DApps Development
Layer-3 networks allow developers to create multichain decentralized apps that users can access on different blockchains. Such DApps improve user experience and enhance scalability.
NFT Applications
Since layer-3s facilitate the development of multichain DApps, developers can create multichain NFT marketplaces that enable users to trade their non-fungible assets across different networks.
Security Applications
Layer-3s boost security across various blockchains by creating unified and secure identity layers that minimize attack surfaces and simplify fraud detection.
Challenges Faced by Layer-3s
Most of the leading blockchains have interoperability issues. So, layer-3s face the challenge of creating solutions that enable smooth integration between these blockchains. Additionally, layer-3 networks may find it challenging to develop an infrastructure that manages high transaction volumes while maintaining security.
Conclusion
As crypto witnesses massive adoption, layer-1 networks are likely to be overwhelmed with huge volumes of transactions. As such, layer-3 blockchains will continue to play a significant role in ensuring users’ transactions are processed as quickly as possible.
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