Layer 3 (L3), a new blockchain concept that big players in Layer 2 such as Optimism, ZkSync, and StarkWare are quietly building and expected to launch in 2023.
So, what is Layer 3, why do we need L3, and what are the existing L3 solutions? Let's explore these questions in the following article.
What is Layer 3?
Blockchain L3 is an additional layer built on top of the L2 of the main chain to provide scalability and additional customization for decentralized applications. L3 enhances the capabilities of L2 through super-fast scalability, improved privacy, and better control for application projects.
L3 also facilitates easier interaction and cost savings between different layers and networks. According to a recent article by Vitalik Buterin on L3, the ultimate goal of L3 is to provide a more efficient and user-friendly experience for decentralized applications and transactions on the blockchain.
We already have Layer 2, so why do we need Layer 3?
Expansion remains a challenging issue.
Let's look at L2 and its updates regarding transaction speed and transaction fees. We might have thought that this would be the solution for scalability on Ethereum, but in reality, it is not. The numbers associated with the scalability that L2 brings are insufficient for mass adoption.
The transaction speed of Optimistic Chains is only around 200-500 TPS, while ZkRollup Chains are faster with 2,000 TPS. Additionally, Validium networks offer better scalability at around 10,000 TPS but come with a trade-off in terms of security. If validators encounter issues, users cannot transfer funds from L2 to L1.
Ethereum | Optimistic Rollup | Zk Rollup | Validium | Visa | Ethereum 2.0 |
15 TPS | 500 TPS | 2.000 TPS | 10.000 TPS | 20.000TPS | 100.000 TPS |
Therefore, Layer 3 aims to address these limitations and provide further scalability and improvements to enhance the overall user experience in decentralized applications and transactions on the blockchain.
Although ZkRollup currently offers the best scalability, it still falls far behind Visa or Mastercard in terms of transaction speed, which exceeds 20,000 TPS. That is not sufficient, especially when considering legal considerations.
Improvements in L2, such as optimizing call data and enhancing various aspects, have increased transaction speeds by about 200%. However, even with these optimizations, it is still not fast enough. That is why L3 has been introduced.
Layer 3 Solutions
Currently, all L2 solutions are building an L3, or what can be understood as the L2 of L2, each in their own way. However, despite different implementations, all developments in Layer 3 originate from L2, similar to how L2 builds on top of L1.
StarkWare: Layer 3 as the "Layer 2" of Layer 2
In late 2021, StarkWare, the company behind two solutions, StarkEx and StarkNet, with a valuation of $8 billion, introduced their initial definitions of Layer 3.
The definition, as explained by StarkNet, is that L3 is built on top of L2, similarly to how L2 is built on top of L1. Essentially, L2 becomes the L2 of L2.
Transactions on L3 will be compressed into blocks and sent back to L2, which will further compress these blocks and send them to L1. Naturally, each transaction passing through each layer requires transaction proofs, so the hardware and decentralized nature of L2 will be more prevalent.
Therefore, if L2 can reduce costs by a factor of 1,000 compared to L1, L3 can potentially reduce costs by a factor of 1,000,000 compared to L1 while still receiving security from L1.
The advantages of L3 can be summarized as follows:
- Nearly unlimited scalability: If the theoretical numbers are confirmed in practice, L3 would be faster than Visa or Mastercard, making it fully capable in terms of transaction speed and fees for mass adoption.
- Autonomy in choosing development and expansion directions.
- Easier and more cost-effective interaction between L2 and L3 for users.
ZkSync: When Layer 3 is shaped by the Internet of Blockchain.
ZkSync envisions L3 as an ecosystem consisting of independent and customizable blockchains, depending on the needs of the development team, with the ability to choose different scalability options such as zkRollup, zkPorter, or Validium. These blockchains are called HyperChains.
Instead of using traditional bridges, all HyperChains will be connected to each other through a single bridge called HyperBridge, ensuring the security of the entire chain. With HyperBridge, the security of the entire chain is increased tenfold compared to conventional bridges.
In terms of performance, Matter Labs expects L2 solutions to increase performance by 10-100 times, while L3 solutions are expected to be infinitely scalable.
Transaction costs on L3 will decrease exponentially depending on whether the HyperChains publish data on-chain or off-chain.
In terms of programmability, the Matter Labs team is building an SDK framework to facilitate the development of HyperChains. Solidity and Vyper will not be the only programming languages supported. Matter Labs plans to integrate all modern and popular programming languages such as Rust, C++, Swift, and more.
In a simplified manner, ZkSync's L3 development is oriented towards the Internet of Blockchain. It involves independent blockchains called HyperChains and the cross-chain bridge called HyperBridge.
According to Matter Labs, the Layer 3 testnet is expected to be launched in Q1 2023, although based on their past work history, the official release may likely be pushed to Q3 or Q4 2023.
Cosmos | Avalanche | Polkadot | ZkSync - L3 |
Hub | Subnet | Parachain | Hyperchain |
IBC | - | XCM | HyperBridge |
Optimism: The Ambition of Superchain
OP Stack is considered the next scalability solution that the Optimism team is aiming for after the Bedrock update. OP Stack is introduced as a modular, open-source model with high scalability and interoperability.
If you're not familiar with Bedrock, don't miss out on Imota's article about it.
With OP Stack, developers can build their own dedicated blockchains, and Optimism provides them with the most suitable tools for their purposes. These chains are currently named OP-chains.
The entire future model of Optimism will be referred to as Superchain.
Coinbase has joined OP Labs as a key developer of OP Stack, and their plan is to release an alpha version of a fraud-proof machine and a verification tool by the end of this year. This sets the foundation for building and participating in the Superchain. Coinbase recognizes the potential significant profits in building on OP Stack and participating in the Superchain. They will develop chain-specific products for Coinbase, expanding their business beyond existing users and reaching a large user base of over 110 million customers.
OP Stack will be the starting point for future L2 and L3 developments.
Conclusion
L3 is still a relatively new term in the crypto market and will require a significant amount of time, resources, and funding to develop, especially considering that the full potential of L2 has not been fully explored yet.
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