What is a Layer 3 Blockchain?

By Ether Crunch | Ether Crunch | 17 Jun 2024

Cryptocurrency revolves around three different aspects: decentralization, scalability, and security. Layers 1 and 2 focus on these three aspects, but Layer 3 focuses instead on the overall application of blockchains. The first two layers serve as the foundation, establishing the basics of the blockchain. Layer 3 focuses on the application, tailoring it to the user’s needs. Let’s first give an overview of Layers 1 and 2:

  • Layer 1: Layer 1 is where the blockchain is established. The consensus mechanism (Proof-of-Stake, Proof-of-Work, Proof-of-Authority, etc.), protocol rules, governance, transaction processing, smart contracts, tokens, etc. are all established in Layer 1. Essentially, Layer 1 acts as the baseline for the blockchain; it establishes the foundation of the blockchain.
  • Layer 2: Layer 2 serves to try and improve one of the key aspects of cryptocurrency: scalability. Layer 2 is all about improving the functionality of the blockchain by increasing the efficiency of the system. To do this, systems are built on top of the blockchain, like sidechains, rollups, and plasma chains. These are just a few examples of Layer 2 technologies; more systems are being created that would further increase the scalability of blockchains.

All in all, Layer 1 is the foundation of the blockchain, and Layer 2 improves the functionality of the blockchain by increasing scalability. So what does Layer 3 do?

Layer 3 is also known as the application layer. While it does focus on improving scalability by enabling better transaction processing and increasing efficiency, the main focus is to tailor applications to user needs. Another key aspect of Layer 3 is interoperability, connecting the various different blockchains together. An example of this interoperability would be a protocol like IBC (inter-blockchain communication), which serves to enhance communication between decentralized applications. Furthermore, Layer 3 is meant to be customizable, with applications that solve targeted issues. Some examples of Layer 3 are Orbs, Arbitrum Orbit, and zkSync Hyperchains.

Here is a chart that compares the different layers.


If you want to learn more, check out the links below:

What is a layer-3 blockchain, and how does it work?

Layer 3 Blockchains: What They Are And How L3s Improve Scalability

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Ether Crunch
Ether Crunch

Basics to blockchain, crypto, and ethereum.

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