For every successful sequel, there is a subsequent sequel. From razor manufacturers, adding another blade to the shave, to producers commissioning another movie for the franchise. So it is in crypto where Layer2 has replaced Layer1 as the network on which to be found aping into memecoins, opening onchain shorts, and topping up under-collateralized loans.
But Layer2 faces a threat from a new contender intent on stealing its thunder. That’s right, Layer3 season is here. This innovation in crypto network design isn’t about trying to flog new tech or shill nascent networks that are in desperate need for users. Rather, it’s about solving a very specific problem that has emerged as blockchain has matured.
What Is L3?
To understand Layer3, first we should re-examine what constitutes Layer2. A Layer2 network refers to a secondary protocol built on top of an existing blockchain (i.e. Layer1). Layer2 solutions are designed to address scalability and efficiency limitations of Layer1 chains, enabling faster and more cost-effective transactions. Ethereum is a Layer1; Arbitrum a Layer2.
Speaking of Arbitrum, it’s here that we can find one of the clearest definitions of what layer3 constitutes. Its Orbit framework supports the creation of L3 chains “with minimal trust assumptions while enabling ultra-low transaction costs for high-volume applications.” These are application-specific chains that are designed to do one thing and to do it reliably. Typically, this means hosting a single application, with the network solely dedicated to serving the needs of those users.
While Arbitrum has L3s such as Arbitrum Nova, which is dedicated to GameFi, other L2s and sidechains have their own implementations of this technology. On Polygon, for example, there are Supernets, application-specific chains that are similarly dedicated to a single entity and their users. The first implementation of a Supernet in action comes courtesy of Polygon NFT game Aavegotchi, which is releasing its own L3 called Gotchichain.
This sudden spate of L3 development suggests that Layer3 is a new development whose architects are clamoring to find use cases for their freshly pressed tech. In reality, the seeds of L3 can be traced back further in blockchain history that you might expect.
Orbs Did It First
The origins of Layer3 can be found with Orbs, the crypto infrastructure developer that recently raised $10M from DWF Labs. As long as two years ago, Orbs first proposed the use of Layer3 as a scalable network to sit atop L1 and L2 chains. As Orbs Co-Founder Tal Kol explained: “This is an entirely new building block for the blockchain, which builds an extra layer of sophistication into the activity conducted on the chain.”
He added: “Its use extends far beyond the realm of DeFi, although it is massively important here too. We take our decentralized protocol, which is open and permissionless, and make it available for developers using smart contracts in the languages they already use. Using this approach enhances the complexity of the on-chain actions apps can conduct.”
The concept that Orbs pioneered has now begun to gain ground, and Layer3 is no longer an alien term to blockchain developers and users. From an adoption perspective, L3 is still at an early stage. The technology is in the process of being built out as developers get a feel for its capabilities.
Many of the Layer3 networks that come to fruition in the near future will sit atop zk chains that are themselves still being finalized. When cutting-edge tech is stacked upon cutting-edge tech – particularly when that tech is being used to route billions of dollars in assets – it’s essential that nothing breaks.
But as L3s start to come onstream, a new era of blockchain scalability will begin with virtually unlimited throughput for high volume dapps. For the first time, developers will be free to create powerful applications that are not constrained by considerations such as speed or cost. The average end-user may neither know nor care what layer their transactions are being recorded on. But for those tasked with creating and maintaining scalable crypto networks, L3 is shaping up to be the best thing since L2.