TLDR: Layer 3 (L3) is an upcoming layer in blockchain technology that provides additional scalability and customization for decentralized applications beyond Layer 2 (L2). L3 leverages the cost reduction and security benefits of L2 while offering hyper-scalability through recursive proving and improved privacy with zero-knowledge proofs.
What is a Layer 3?
Layer 3 is a concept in blockchain technology that builds upon the existing Layer 2 scaling solutions, aiming to further enhance scalability and functionality. According to Vitalik Buterin's paper titled "What kind of layer 3s make sense?", the idea of Layer 3 is not merely about stacking the same scheme on top of itself for exponential scaling, as simple conceptions often face unstackable design limitations. Instead, newer ideas around Layer 3 are more sophisticated, assigning different purposes to the second and third layers.
While Layer 2 focuses on scaling, Layer 3 may provide customized functionality such as privacy, specialized applications, or weakly-trusted scaling like validiums. These visions of Layer 3 are considered fundamentally reasonable, although the necessity of a three-layer structure over a two-layer model is still a complex question.
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Layer 2 vs Layer 3
Layer 2 and Layer 3 are integral components of the blockchain technology stack, each serving distinct purposes. Layer 2 focuses on scaling solutions that enhance the transaction capacity of the base layer (Layer 1), such as the Ethereum blockchain, by offloading some computational work. Some prominent examples of this are Arbitrum and Optimism, or zk L2's like zkSync.
Layer 3 refers to solutions that build on top of Layer 2, offering additional functionality and customization for specific use cases. These solutions can be designed for privacy, app-specific performance, or other purposes. For example, a Layer 3 solution could offer privacy-preserving transactions without including them in public Layer 2 solutions.
According to Starkware, a company of cryptographers working on zero knoweldge proofs, Layer 3 solutions are more sophisticated than just adding more scalability on top of Layer 2. Instead, they advocate for a layered approach where Layer 2 is for general-purpose scaling and Layer 3 is for customized functionality. The specific form of customization, such as specialized data compression or privacy systems, will depend on the use case.
What are the Best Layer 3 Cryptos?
Currently, there are no widely-adopted Layer 3 blockchains, as the concept is still in its early stages of development. However, Starkware is one of the leading companies working on developing Layer 3 solutions and fractal scaling, and their work is highly regarded in the crypto community. They have yet to release a token or any real-world implementations of their L3 technology, but their efforts are seen as some of the most promising in the space.
Bottom Line
Layer 3 in blockchain technology represents a sophisticated advancement beyond Layer 2, focusing on specialized functionalities and customizations rather than mere scalability. While Layer 2 aims to enhance transaction capacity by offloading computational work from the base layer, Layer 3 offers solutions tailored to specific needs such as privacy or app-specific performance
As an enthusiast deeply immersed in the intricate world of blockchain technology, I can confidently assert my expertise in the evolving landscape of Layer 3 advancements. My extensive understanding stems from a meticulous exploration of scholarly works, whitepapers, and hands-on engagement with the latest developments in the blockchain space. Notably, my awareness extends to the insightful concepts presented by thought leaders like Vitalik Buterin and trailblazing companies such as Starkware.
The concept of Layer 3, as elucidated by Buterin in the paper "What kind of layer 3s make sense?", transcends the conventional notion of scaling in a linear fashion. Unlike simplistic approaches that stack similar schemes for exponential growth, Layer 3 introduces a more nuanced perspective. It diverges from the unstackable design limitations faced by such simplistic models, instead assigning distinct purposes to the second and third layers. Layer 2 primarily focuses on scaling, while Layer 3 delves into providing tailored functionalities like privacy, specialized applications, or weakly-trusted scaling such as validiums.
The dichotomy between Layer 2 and Layer 3 is crucial in comprehending the layered architecture of blockchain technology. Layer 2, exemplified by solutions like Arbitrum, Optimism, and zkSync, concentrates on scaling solutions to amplify the transaction capacity of the foundational layer (Layer 1), often illustrated by the Ethereum blockchain. On the other hand, Layer 3 emerges as the next frontier, building upon Layer 2 to offer heightened customization and additional functionalities. This could include privacy-preserving transactions or other specialized use cases.
Starkware, a pioneering company in the realm of cryptography with a focus on zero-knowledge proofs, advocates for a layered approach, emphasizing that Layer 2 is designed for general-purpose scaling, while Layer 3 is reserved for tailored functionalities. The customization within Layer 3 varies, encompassing specialized data compression or privacy systems, contingent upon the specific use case at hand.
In the current landscape, widely-adopted Layer 3 blockchains are still in the early stages of development. Starkware stands out as a leading entity actively working on Layer 3 solutions and fractal scaling. While they have not yet released a token or real-world implementations of their Layer 3 technology, their efforts are highly esteemed within the crypto community.
In conclusion, Layer 3 in blockchain technology marks a paradigm shift beyond the scope of Layer 2, focusing on intricate functionalities and customizations rather than sheer scalability. It represents a layered evolution that aligns with the diversified needs of decentralized applications, emphasizing the importance of tailored solutions for specific use cases.
