Home Cryptocurrency What Are Layer 3 Chains in the Blockchain Industry?

What Are Layer 3 Chains in the Blockchain Industry?

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Blockchain systems are organized into layers, each serving a unique role in making the entire ecosystem functional and efficient. These layers are called Layer 0, Layer 1, Layer 2, and Layer 3. Together, they ensure security, scalability, and usability for blockchain technology.

Layer 3 focuses on user interaction, providing applications like wallets, games, and marketplaces that make blockchain accessible to everyone. Layer 3 relies on Layers 1 and 2 for security and efficiency, offering a seamless user experience.

In order to understand Layer 3 chains, we must first understand the role of other layers.

Layer 0: The foundations

Layer 0, often called the “infrastructure layer” or “network layer,” is the foundation of blockchain technology. It ensures the security, scalability, and stability of the platforms and applications built on top of it.

A primary role of Layer 0 is to facilitate cross-chain interoperability. By enabling seamless communication and data sharing between blockchains, it removes the isolation that would otherwise limit their utility.

This interconnectedness allows blockchains to collaborate, enhancing dApps by leveraging each other’s strengths. Layer 0 includes the essential tools and connections to build Layer 1 blockchains.

Layer 0 examples

  1. Cosmos

    Provides the environment for developing Layer 1 blockchains.

  2. Avalanche

    A fast, eco-friendly platform for building blockchains and decentralized apps.

  3. Internet Computer

    It can be seen as Layer 0 and Layer 1. It is providing the ground for blockchains and applications to build on or intergate to.

Layer 1: The Mainnet

Layer 1 (L1) blockchains are the main networks. They process transactions, secure the network, and record everything on the blockchain to keep it safe and trustworthy.

Bitcoin was the first Layer 1 blockchain, introducing the ‘decentralized digital currency’ concept. Ethereum advanced the concept with smart contracts and self-executing programs that enable developers to build decentralized applications (dApps) without intermediaries.

Each Layer 1 (L1) blockchain operates independently and uses its native token to process and reimburse transaction fees, often called gas fees. These networks serve as the “source of truth,” maintaining an immutable record of transactions.

While every Layer 1 network has unique features, they all aim to provide a secure, scalable infrastructure for running blockchain-based apps (like games or digital payments). Excluding Bitcoin, the majority of Layer 1 chains validate transactions based on proof of stake.

However, as usage increased, Layer 1 blockchains faced challenges like slower transaction speeds and higher fees. These limitations spurred the development of additional layers, including Layer 2 and Layer 3 solutions, to enhance scalability and efficiency.

Layer 1: examples

  1. Bitcoin

    The most dominant cryptocurrency in 2025, Bitcoin, is a Layer 1 chain.

  2. Ethereum

    Numerous dApps and tokens were launched on Ethereum. It is a highly advanced chain that shaped the crypto industry as know it today.

  3. Algorand

    While there are many Layer 1 chains, Algorand was picked due to high interest in the Layer 1 chain as staking is enabled for all.

Layer 2: Scalability and features

Layer 2 blockchains are built on top of Layer 1 networks to address high transaction fees, slow speeds, and scalability. 

These sub-blockchains use the infrastructure of Layer 1 to enhance performance while reducing costs. However, Layer 2 blockchains depend on their base networks; they cannot function if the Layer 1 blockchain is down.

Layer 2 (L2) networks help make blockchains faster and cheaper by handling some transactions outside the main blockchain. They then send the final results back to the main blockchain for verification.

Additionally, Layer 2 solutions vary in design. Some are built by changing the original blockchain (operating as forks), while others are new systems added on top (independent upgrades).

While Layer 2 makes blockchains more efficient, it can sometimes make the network less secure and decentralized because these newer solutions may not be thoroughly tested yet.

Writer’s note: Layer 2 solutions include Rollups (Optimistic Rollups like Optimism and zkRollups like zkSync), Sidechains (e.g., Polygon), and State Channels (e.g., the Lightning Network). Below, we’ll define some of these in detail:

Layer 2 chain types

Optimistic rollups

Optimistic rollups are a Layer-2 solution that helps blockchains process more transactions at lower costs. They work by bundling multiple transactions into one “rollup” and processing them off the main blockchain.

These rollups assume transactions are valid unless proven otherwise, allowing for reduced congestion on the main blockchain. If errors are found, proof can be submitted to correct them, maintaining security through dispute mechanisms.

Zero-Knowledge rollups (ZK-Rollups)

ZK-Rollups are Layer-2 solutions that enhance blockchain efficiency by processing transactions off-chain. They generate proof to validate transactions without revealing all details, which is then sent to the main blockchain (Layer 1) for verification.

This method keeps blockchains scalable, efficient, and private, using mathematical guarantees for accuracy instead of trust to ensure fast and secure transactions.

Sidechains

Sidechains are separate (or independent) blockchains that work alongside a main blockchain to improve scalability. They allow users to transfer assets back and forth between the two chains.

Sidechains handle their transactions and don’t depend on the main blockchain for security, making them faster and more flexible. However, they rely on their validators to ensure safety, which means their security is independent of the main chain.

Validium

Validium is a Layer-2 solution that enhances blockchain scalability by moving transaction data off-chain while retaining proofs on the main chain. Unlike rollups, it stores data externally but uses cryptographic proofs for transaction validity.

This method improves scalability and reduces costs, though it sacrifices some decentralization. It’s often the practical choice for applications with high transaction volumes.

Layer 2 examples

  1. Optimism

    Optimism is a very popular optimistic rollup Layer 2 chain on Ethereum.

  2. Linea

    Linea is a Zero-Knowledge rollup, compatible with Ethereum Virtual Machine (EVM).

  3. The Liquid Network

    Liquid Network is a Bitcoin Layer 2 chain and a sidechain.

  4. StarkEX

    StarkEX is a Layer 2 chain on Ethereum, data availability: Rollup and Validium.

Layer 3: The application layer

Layer 3 is where decentralized applications (DApps) operate. These apps run on blockchain networks and allow users to do things like send cryptocurrencies, trade, or borrow money without relying on central authorities.

Built on top of Layer 2 solutions, Layer 3 (L3) enhances scalability and performance, offering solutions to reduce network congestion and computational bottlenecks. It also allows the creation of customized networks that are often required depending on the industry the chain will be used for, centralized or decentralized.

ZK chain L3 | source

While Layer 2 focuses on improving the performance of a single blockchain, Layer 3 expands the blockchain ecosystem’s capabilities by connecting multiple blockchains and facilitating seamless communication between them. This allows DApps to operate with greater efficiency, security, and flexibility. 

Layer 3 improves how blockchains work by making them faster and easier to use. It gives developers more tools to create apps that fit specific needs, helping these blockchains run smoother and work better with other blockchains. 

One idea proposes that Layer 3 could support privacy-focused applications, enhance cross-chain interoperability, and offer tailored solutions for various industries, such as finance, gaming, e-commerce, logistics, and healthcare.

It may host confidential smart contracts, facilitate asset transfers between blockchains, and cater to specific use cases like supply chain management and healthcare.

Layer 3 examples

  1. Arbitrum Orbit

    Custom chains can be created on the Layer 3 chain (on top of Arbitrum Layer 2).

  2. zkSync Hyperchains

    The blockchain technology uses ZK-rollups to allow customized Layer 3 chains for specific applications.

  3. Orbs

    The Layer 3 chain focuses on decentralized execution for smart contracts via custom logic.

The benefits of Layer 3 chains

Layer 3 blockchains offer great benefits to the blockchain ecosystem:

  • Layer 3 solutions enhance scalability through specialized blockchains that improve throughput and reduce congestion for DApps.
  • They enable seamless communication and asset transfers between different blockchains.
  • Layer 3 allows the development of tailored blockchains for specific industries, such as gaming, supply chain, and logistics, offering flexibility beyond Layer 1 and Layer 2.
  • These solutions can add extra security to protect user data and transactions, especially for apps focused on privacy.

Conclusion

Layer 3 blockchains are being developed and might be customized chains that tailor the industry’s needs. With the promise of faster transaction speeds, lower fees, and improved user experiences, 

Layer 3 technology may enable more people to engage with blockchain and up the adoption rate.

While Layer 4 would be the next evolutionary step, there is no consensus on what Layer 4 is. Developments stop at Layer 3.


FAQ

What is Layer 3 in crypto?

How many Layer 3 projects are there?

Is Layer 3 more complex than Layer 2?

References

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At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Sal Miah
Crypto & Fintech Writer

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