In stark contrast to the last two years, 2023 has the opportunity to lay a new foundation for the evolution of blockchain. That’s because this year will be defined by the application layer of the blockchain that will open a whole host of new scaling solutions. At this layer, the Web3 community has an opportunity to focus on refining both the underlying technology that powers the blockchain and the way it approaches much-needed solutions to some of the most insidious problems that the crypto industry faces. In this way, layer 3s are set to help drive new innovation and mass adoption.
What exactly are layer 3s?
Layer 1s are characterized as the foundational blockchains like Bitcoin and Ethereum that have their own native cryptocurrency used to reward those who work to secure the network itself. L2s are protocols built on top of L1s designed to increase transaction speed and mitigate scaling difficulties of layer 1s while leveraging the security of the base chain. For example, Arbitrum is an L2 created to improve Ethereum’s speed of processing transactions as well as overall flexibility and scalability, and it has given birth to a broad range of DeFi protocols. Layer 3s, on the other hand, offer even higher levels of customizability. At this layer, developers can carry out customized designs that L2s cannot easily achieve, especially for lower-cost execution and privacy-preserving functionalities.
How L3s can lower cost and improve scalability
While L2s are currently being used for general-purpose scaling, L3s enable customized scaling and realize important functionalities — such as privacy — that L2s can’t effortlessly achieve on their own. L3s increase computation speeds and scalability of single applications by not having to share ZK-circuits with other applications on a single chain.
The Ethereum multi-layer architecture was first proposed by the StarkWare team in Ethereum multi-layer architecture. The current L2 serves as a general-purpose scaling, while L3 accomplishes customized scaling. For example, an L3, which adopts customized circuits depending on the demand of a specific decentralized application, can achieve better performance. Another example is Validium as L3. This design provides higher levels of throughput at a relatively low cost for decentralized apps by avoiding pushing compressed data to the L1 and utilizing validators to secure the digital asset. L3s can be employed as low-cost and high-performance scaling solutions that allow projects to have more choices for potential solutions, depending on their particular use cases.