Layer 3 Blockchains Explained

A moment of celebration calls for a party and what’s better than a layer cake, right?

A favourite at weddings, everyone loves to savour a layer cake and even take some pieces home.

A layer cake consists of multiple layers of cake that are held together by frosting or another type of filling, such as jam or other preserves.

Now, you might be wondering whether you are reading a finance blog or a food blog 😄

But worry not.

We are on a mission to educate our readers about blockchain technology, and this is yet another opportunity for the same.

Coming back to layers, even blockchain is nowadays divided into layers like a layer cake.

We have already covered layer 1 (L-1) and layer 2 (L-2) blockchains in our previous posts.

If you haven't checked out those articles, we suggest you give them a read and then come back to this piece. 

Recommended Read: Decoding Layer 2 Blockchains

Layers of a Blockchain

So, what do layers mean when it comes to blockchain?

To answer the above question, we will have to look at the recent phenomenon.

Once a rather niche realm, blockchain technology is today being embraced by every major multinational organisation.

The phenomenon has led to data congestion which means that projects are finding it difficult to process large volumes efficiently and timely.

The high rate of adoption has led to data explosion at such a level that the industry is facing the blockchain trilemma of scalability, security and decentralisation.

What it means that any blockchain will have to sacrifice on one of the above three features if it wants to improve on two of them.

To address the blockchain trilemma, developers came up with the innovative method of dividing a blockchain into layers like a layer cake.

Yes, that’s true.

Once a blockchain is divided into layers, different functions get distributed among them. This way, a blockchain can process a large volume of data efficiently and timely.

Let's look at what are layer 1 blockchains and layer 2 blockchains.

L-1 is the foundational protocol of a blockchain network that takes care of ledger, consensus mechanism and security.

L-2 is a blockchain that is built on top of a L-1. L-2 is where transactions get processed.

Wait, there is more... a layer 3 blockchain. 

What is a Layer 3 (L-3) Blockchain?

• L-3 is a blockchain layer that is built on top of L-2.

   

• A customisable application-specific blockchain layer, L-3 is where decentralised applications (dApps) are hosted.

   

Understanding Decentralised Applications (dApps)

• L-3 is a very tailorable scaling solution that offers functionalities and interoperability. It offers unparalleled scalability and customisation to dApps.

   

Note that a L-3 protocol is never generic and is only built to support the specific requirements of a dApp solution, such as privacy or hyper-scalability.

How Does L-3 Work?

It is important that we understand the architecture of a blockchain network.

While L-1 is the foundational protocol of a blockchain, L-2 exists on top of L-1.

While the former takes care of ledger, consensus mechanism and security, the latter processes transactions.

Similarly, L-3 exists on top of L-2, with the former taking care of scalability and the latter handling the functioning of dApps.

Each layer in a blockchain is connected to each other with smart contracts.

It is crucial for each layer to support the other; otherwise, this is how the whole pyramid would turn into a mess. 

Features of L-3

The L-3 protocol offers those features which make it viable for adoption by dApps.

Let's have a quick look at these factors.

• Customisable Functionality: L-3 offers a platform for dApps to function at a very high performance effortlessly without any bottleneck. dApps go to L-3 for its pioneering scalability and efficiency.

   

• Efficiency: Next, L-3 offers enhanced efficiency to the blockchain network as the rest of the layers take care of security and scalability. It leads to higher production which makes more and more dApps onboards L-3.

   

• Cost Effectiveness: L-3 is a very cost-effective scaling solution that has led to several dApps onboarding it. A fusion of cost effectiveness and productivity, L-3 is an ideal solution for dApps. 

Use Cases of L-3

Let us now have a quick look at the main use cases of L-3.

• Decentralised Finance (DeFi): DeFi is the focus area of dApps built on L-3 as such applications have diverse deliverables and L-3 is just the right platform for them, given the high level of customisation L-3 offers.

Learn more about DeFi here

It helps that L-3 can manage a high volume of transactions efficiently and quickly, making way for a large number of DeFi apps to adopt L-3.

• Game Finance (GameFi): GameFi is a fusion of online gaming and DeFi that offers play-to-earn (P2E) model.

L-3 hosts a large number of GameFi apps now as decentralised online games, with its in-game Web3 economy, has found its way to L-3 scaling solutions. 

L-3 Solutions to Look Out For...

The most prominent L-3 scaling solutions you should look out for are:

• Arbitrum Orbit: Arbitrum Orbit is a L-3 that is built on top of Arbitrum Nitro. Project developers can create applications on this L-3 due to lower transaction costs and enhanced scalability.

   

• Orbs: Orbs is a L-3 that is built on top of Ethereum, Polygon etc. Orbs lets developers build their smart contracts as per their custom requirements.

   

• Xai Games: Xai Games is a L-3 that focuses on GameFi. It fosters a GameFi ecosystem that lets game creators build games for a super exciting experience. 

Why Should a BitDelta Traders Care About L-3?

L-3 is one of the most exciting trends to emerge in blockchain technology and you should pay a close attention to the latest L-3 solutions. 

Since the online economy is transitioning from Web2 to Web3, though slowly but resolutely, the scalability offered by L-3 has made it a favourite among dApps.

Building upon the strengths of L-1 and L-2, L-3 offers an efficient and scalable solution that is open for adoption by a variety of dApps.

If you want to keep yourself abreast of the latest developments in finance, follow the BitDelta Academy to get the latest updates.