The blockchain era and its underlying technologies have resulted in a massive disruption of centralized finance and traditional systems of operations. The unique technologies of the blockchain gave birth to the development of cryptocurrencies and digital tokens with complex cryptography and encryptions.
Blockchain technology and cryptocurrencies have gained widespread popularity and increased adoption due to wealth creation and the life-changing opportunities it presents.
As the adoption of cryptocurrencies and blockchain technology continued at a high, a need arose to maintain the blockchain core foundations.
Blockchain technology is founded on three core values and foundations: decentralization, security, and scalability. This is known as the "Blockchain Trilemma."
Over time, multiple blockchain layers have been developed to maintain core blockchain functionalities due to massive and continued adoption.
In this article, we will fully understand the layer 3 blockchain, existing blockchain layers, the blockchain trilemma, blockchain interoperability, and differences between existing layers of the blockchain.
Why Does The Crypto Market Need Layer 3 Solutions?
The cryptocurrency markets have experienced a massive boost in new user adoption, as recognized cryptocurrency exchanges and trading platforms enable access to wealth opportunities.
On a daily, newer cryptocurrencies and decentralized applications are developed and deployed onto the blockchain to meet user demands. These constant developments and deployments of decentralized applications and cryptocurrencies have taken a toll on the existing blockchain layers and scalability prowess.
To address layer 1 scalability issues, layer 2 blockchain solutions were created to maintain and scale layer 1 blockchains. Layer 1 blockchains are the base of blockchain technology, where all decentralized transactions are validated and secured on its network.
Layer 2 blockchain solutions, as base support to layer 1, are gradually becoming congested and over-utilized as numerous blockchain networks tackle scalability.
The Blockchain Technology Trilemma
The blockchain trilemma has been a topic of discussion for many crypto enthusiasts and blockchain developers, searching for answers to making the blockchain complete in itself.
What, then, is the 'Blockchain Trilemma'.?
To begin, a blockchain is a distributed ledger and storage application of transactional records and information across a chain of networks.
Blockchain technology is built with a structure and aims to carry out its processes in a Decentralized, Secure and Scalable structure all at once.
The influx of new users interacting with blockchain technology has resulted in increased adoption, which has made it difficult for the blockchain to accomplish the trio package of Decentralization, Security, and Scalability.
Most blockchain ecosystems and networks try to build solutions to solving the blockchain trilemma, but at most, they end up sacrificing one out of the three mentioned above.
Blockchain networks and ecosystems, such as Bitcoin (BTC) and Ethereum (ETH), are big on security and decentralization but suffer scalability issues owing to their model and consensus mechanism.
Other blockchain networks, such as Solana (SOL), have increased throughput and high network scalability owing to their consensus mechanism and model, but at the detriment of decentralization.
Blockchain Interoperability
Blockchain terminologies are a must-have knowledge for new users and beginners looking to navigate the cryptocurrency and blockchain industry seamlessly.
To get a total sense of the combined terminologies "Blockchain and Interoperability," we will take a quick insight into what is blockchain and interoperability.
A blockchain is a distributed ledger and database shared and linked between computer network nodes. The blockchain securely and accurately records transactional information electronically in a digital format.
A blockchain network collects and gathers digital information in groups, known as blocks, that hold data sets.
Each block present in a blockchain has finite storage capacities and can get filled.
In a case where a block is filled, a new block is formed, leaving the filled block closed and linked to the previously filled block, forming a chain of data known as the blockchain.
Interoperability, on the one hand, refers to the capacity of different systems and networks to actively and effectively communicate with each other distinctly without discrimination.
Numerous distinct blockchain networks and ecosystems are present in the blockchain industry, with unique strengths that set them apart.
The blockchain industry is growing with emerging and innovative solutions by the day to cater to the issues facing blockchain ecosystems.
Blockchain interoperability is the ability and capacity of distinct blockchain networks and ecosystems to effectively communicate and process digital transactional records across ecosystems and cross-networks.
Blockchain interoperability proposes and enables active communication across several blockchain protocols. As a result, separate chains can communicate and exchange information, making it easier to switch between blockchain networks.
At the time of writing, there are currently no layer 1 blockchain technologies that can accomplish interoperability across blockchain networks.
Layer 1 blockchain networks or protocols are still faced with the heavy burden of handling and processing large amounts of transactional data due to multiple user requests and continuous adoption.
The ability of cross-blockchain ecosystems and networks to communicate effectively and interoperably is still being explored and researched.
Existing Blockchain Layers Before Layer 3
Blockchain technology, over the years, has seen continuous innovation and development to the core of its technology.
Blockchain has evolved into four different layers, with inputs to increase the overall scalability and throughput of the blockchain.
However, before layer 3 protocols were created, the blockchain ecosystem was based on three (3) blockchain layers which can be found below ;
Layer 0 Blockchain
The Layer 0 Blockchain is the core and basic foundation of blockchain technology and its unique operations.
The internet and connectivity, hardware, and many more processes that serve as starters for the blockchain to exist in reality are the zero layer of the blockchain.
Layer 0 is the starting phase of the blockchain, which enables the operation of several networks, such as Bitcoin (BTC), Ethereum (ETH), and many more.
In addition, the Layer 0 blockchain provides a prospect and foundation for the blockchain to be interoperable and communicate between the top and lower layers in a unique blockchain ecosystem network.
Layer 1 Blockchain
The layer 1 Blockchain is an operational and improvement layer above the layer 0 blockchains. The layer 1 blockchain network and its processes are kept running and operational at this layer.
The security, storage, and validation of transactions often occur in the layer 1 blockchain protocol.
Increased adoption and usage of the layer 1 blockchain for the security of digital assets and transaction validations have resulted in scalability issues and concerns at the layer1 blockchain level.
Scalability limitations present in layer 1 blockchain technologies have led to the development of layer 2 solutions and blockchain protocols.
The constant innovation and creation of new blockchain layers are developed to solve and tackle the scalability issues present in layer 1 blockchains.
The communication and interoperability between layer 1 blockchain and improved layers are now possible, ensuring maximum Efficiency and scalability of the layer 1 blockchains.
Some examples of layer 1 blockchain technology include Bitcoin (BTC), Ethereum (ETH), and Solana (SOL), to name a few.
Layer 2 Blockchain
The Layer 2 blockchain is designated and known as a support blockchain layer of the layer 1 blockchain. Layer 2 protocols and blockchain technologies act as solutions to the limitations of layer 1 blockchain technology by offering a more scalable platform.
This layer takes off a huge chunk of load from layer 1 protocols and communicates effectively to the layer 1 blockchain to maintain the security of transactions and validations.
Layer 2 is built for throughput and scalability as transactions can be validated and secured on its network, thereby splitting the workloads of the layer 1 blockchain. The main goal of the layer 2 blockchain and protocols is to solve the scalability and performance issues now plaguing the major cryptocurrency blockchain networks.
For example, Bitcoin (BTC) and Ethereum (ETH) can still not process multiple transactions that run into thousands per second due to their low-efficiency consensus mechanism.
This is detrimental to the growth and long-term development of Bitcoin (BTC) and Ethereum (ETH) as new projects develop alternatives and innovative solutions.
Scalability and throughput of blockchain networks are necessary for scaling user adoption on a broader scale. Two well-known examples of layer 2 solutions are the Bitcoin Lightning Network and the Ethereum Plasma. Newer industry layer 2 solutions and blockchain technologies are also up and running, such as ZK Rollups and Optimism Rollups.
What Is Layer 3 Blockchain technology?
The layer 3 blockchain, also known as Layer 3 protocols, refers to the application layer and aspect of core blockchain technology.
Layer 3 blockchain technology renders effective decentralized application solutions for the interoperability of different blockchain networks with cross-chain capabilities.
Its technologies and operations are visualized as applications that can be seen and interacted with by users, compared to other blockchain layers.
The solutions of layer 3 protocols to existing blockchain layers are evident as layer 3 blockchain aims to ensure the interoperability of blockchain networks.
Layer 3 blockchains are fully integrated with other existing blockchain layers, creating an application where interactions and communications across blockchain layers are possible.
The primary aim and objective of layer 3 protocols and solutions focus on achieving blockchain interoperability without depending on centralized intermediaries.
Layer 3 blockchain applications contain smart contracts, chain codes, and decentralized applications (DApps). The software application that users can seamlessly interact with is included in the application layer of the layer 3 protocol
In summary, layer 3 protocols and blockchain technologies are scalable solutions created to enable multiple operations and communications of cross-chain and blockchain networks.
How Does The Layer 3 Blockchain Protocol Solve Interoperability Problems?
Interoperability across multiple blockchain networks will be a step in the right direction in solving scalability and performance issues currently experienced on existing individual blockchain networks.
Layer 3 blockchain and protocols are represented by intuitive user interfaces and blockchain-based applications, such as decentralized finance (DeFi) applications, Game-fi platforms, and distributed storage applications.
Several layer 3 blockchain applications have enabled features such as cross-chain functionalities, which help users to access multiple blockchain platforms and networks via a single application.
Examples of Existing Layer 3 Protocols
Interoperability standards for connecting various blockchain networks and protocols have been developed by numerous layer 3 projects. Here is a summary of some of the best layer 3 blockchain project examples you should follow;
Quant
Quant would be the next well-known example among layer 3 blockchain technologies. The Quant layer 3 protocol facilitated the connection of public and private chains and was created as an effective option for enterprise blockchain networks.
Its protocol uses various innovative technologies for interoperability, including the Overledger DLT gateway.
Quant offers many noteworthy features, such as multi-ledger tokens and multi-DLT smart contracts.
Additionally, the Quant project and layer 3 protocol has partnered with well-known companies, including Oracle, Hyperledger, and Nvidia.
The Ripple Interledger Layer 3 Protocol
In the current cryptocurrency markets and blockchain industry, Ripple's Interledger Protocol (ILP) is essentially the most well-liked layer 3 solution. Ripple is a multi-layer architecture with three different layers, each serving a different purpose. Local area networks, or LANs, are featured in layer 2, whereas layer 1 serves as the blockchain ledger.
The layer 3 protocol in Ripple, called Interledger Protocol, seeks to provide cheaper and quicker transactions on the Ripple blockchain. The Ripple Interledger Protocol, one of the most well-known layer 3 blockchain protocols, provides an effective means of interoperability across blockchain ecosystems and networks.
Layer 3 Versus Layer 2 And Layer 1 Blockchain Protocols
Layer protocols on the blockchain have been developed with unique features and solutions to render the blockchain efficient and interoperable.
We will look into the key differences that set them apart to understand the unique capabilities of layer protocols fully.
Differences Between Layer 3 & Layer 2 & Layer 1 Blockchain Protocols
The following contains differences and operability unique to each blockchain layer and protocol.
- Layer 1: Layer 1 protocols and blockchains are the base levels of blockchain technology and consist of frameworks and infrastructure for validating, storing, and processing transactions.
- Layer 2: Layer 2 blockchain protocols and blockchains are built to scale up the efficiency and performance ratio of layer 1 protocols. This layer contains scalable sets of features to improve on layer 1 blockchains.
- Layer 3: Layer 3 protocols are decentralized software and applications that users can visibly use. This layer of blockchain technology features interoperable solutions across blockchain layers and cross-blockchain networks.
Conclusion
The constant innovation and solutions of blockchain layers improve the efficiency of the blockchain and scale the high-rise adoption of cryptocurrencies. As the efficiency of the blockchain improves, the prospects and value of cryptocurrencies traded in the markets are likely to scale up.
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Frequently Asked Questions On Blockchain Layers
Layer 3 blockchain technology are trying to make their way into crypto mainstream, there are question that have trouble traders and investors. Here are some of those questions.
What Is Layer 3 In Crypto?
Layer 3 is a unique set of protocols that comprises an interactive application layer for hosting decentralized applications. Layer 3 solutions in the Crypto industry is gaining more awareness as it creates a platform for the different layers of the blockchain to be interoperable. Layer 3 solutions ensure total integration and communication of cross-blockchain networks in the crypto and blockchain industry.
Is Ethereum A Layer 3?
Ethereum is a layer 1 blockchain protocol that has seen recent innovations leading to what is now called the Ethereum Merge. Ethereum founder Vitalik Buterin may have hinted in a layer three general discussion about visions of deploying layer 3 solutions to the Ethereum blockchain. Ethereum is rolling out plans for increased scalability and is currently building a layer 2 blockchain protocol at the development stage.
What Are Layer 2 And Layer 3 In Blockchain?
Layer 2 refers to frameworks and solutions for scaling layer 1 blockchain networks.
Layer 3 is the application layer and infrastructure of the blockchain network. Layer 3 protocols proffer solutions for the interoperability of blockchain layers and networks.
Layer 3 and its interoperability solutions will go a long way in scaling the blockchain ecosystem.
What layer Is Solana?
Solana is a layer 1 blockchain protocol and network with a scalable infrastructure for deploying smart contracts and decentralized applications. Solana layer 1 blockchain is highly scalable as it employs a unique Proof of Stake (POS) and Proof of History consensus mechanism. The Solana blockchain is very popular and has a vast community of users leveraging its layer 1 blockchain protocol.
