The following is a guest post from a blockchain expert.
If we had stopped with dial-up internet, we wouldn’t have seen the rise of Netflix, real-time gaming, or cloud computing. The development of internet infrastructure was vital for widespread usage. Similarly, Layer-3 solutions represent a necessary advancement in blockchain infrastructure—eliminating friction, reducing expenses, and making blockchain genuinely accessible to the average user. Yet, some critics claim they introduce unwarranted complexity.
This ongoing discussion regarding Layer-3s is a significant focus for us. Recently, the governance body voted in favor of joining the Base ecosystem, a crucial decision that marks the start of our transition to Base, Coinbase’s Layer-2 network, designed specifically for privacy-centric applications. We are confident in the Layer-3 concept and view these solutions as the next step in blockchain scalability.
Our shift to Base isn’t merely about chasing trends; it reflects our understanding that a modular, interoperable blockchain architecture is essential for real-world adoption. We are not just theorizing; we are actively constructing this vision.
The History
To enable cryptocurrency to reach a billion users, transactions must be fast, inexpensive, and seamless. Layer-3s are not just theoretical; they are a practical answer to the reality that Layer-2 solutions are still not sufficiently affordable for mass adoption. Additionally, Layer-3s can support specialized functionalities that are currently unattainable on Layer-1s or Layer-2s—such as advanced zero-knowledge capabilities.
Essentially, Layer-3s tackle a fundamental issue: if Ethereum (Layer-1) is costly, Layer-2s alleviate this by processing transactions off-chain and only committing final state proofs back to Layer-1. Layer-3s enhance this process by settling on Layer-2s rather than on Ethereum directly, creating a tiered model that minimizes costs at every level.
Layer-3s naturally emerged as blockchain developers sought improved efficiencies. The idea was first introduced by StarkWare in late 2021 with the term “fractal scaling”. Vitalik Buterin also examined Layer-3 structures in 2022, proposing that they could serve specialized functions beyond mere scaling. By 2023, notable Ethereum scaling teams had begun rolling out Layer-3 frameworks. Arbitrum launched Orbit for creating Layer-3 “Orbit chains,” while Matter Labs introduced ZK Stack for constructing zk-rollups as either Layer-2s or Layer-3s. These advancements have transitioned Layer-3s from theory into practical application.
Not Everyone Is a Fan
Critics present several arguments against Layer-3s: many assert that Layer-2 solutions are not fully developed yet, making the push for Layer-3s seem premature. Some contend that Layer-3s introduce complexity. However, great technology is about rendering complexity invisible to users—much like the internet did. There are also those who see Layer-3s as unnecessary, claiming that their objectives could be achieved by enhancing Layer-2 solutions.
Nonetheless, an important realization is coming to light, suggesting that Layer-3s are more timely than ever: even Layer-2s, designed to facilitate faster, cheaper transactions, may still not meet all needs.
In specific scenarios, a Layer-3 can further reduce costs, ensuring nearly zero gas fees. This capacity for cost reduction is crucial. For blockchain to gain traction, transactions must be almost free for end users, and Layer-3s provide just that.
This encourages a future of cost abstraction. Ultimately, this is superior for onboarding new users, enhancing liquidity, and fostering the development of new decentralized applications (dApps) on-chain. When users can engage in transactions without concern for gas fees, adoption accelerates. Developers are empowered to create applications that wouldn’t be financially feasible on higher-fee networks, and liquidity can flow more freely when it isn’t stifled by transaction costs. The whole ecosystem benefits.
However, abstraction is not solely about cutting costs; it is also about enhancing usability and customization.
Customization and Connectivity
Layer-3s are also a logical response to the concern regarding ecosystem isolation. Chains want to avoid becoming isolated silos. Independent Layer-1 blockchains encounter significant hurdles: they must establish their own security, attract users from the ground up, and develop an entirely new infrastructure. Many so-called “Ethereum killers” like Cardano, Fantom, or Tezos have found out how challenging this journey can be.
Layer-3s provide a viable alternative, allowing chains to stay linked to established ecosystems while offering better customization options: here lies their true strength. Application-specific chains can optimize for unique use cases, whether it’s zero-knowledge proofs, gaming, DeFi, social networking, or enterprise applications. They can implement custom virtual machines, consensus mechanisms, or privacy features tailored to their specific needs, all while remaining integrated with the wider ecosystem, leveraging its liquidity and security.
This combination of customization and connectivity allows these specialized applications to excel at their purpose, ultimately benefiting the end users.
A Pathway to Abstraction
Some may argue that Layer-3s complicate web3 too much, but it’s possible that they might resolve existing problems themselves. If properly implemented, the complexity can remain hidden from end users.
Modern dApps can abstract the underlying layers through smart wallet designs and user-friendly interfaces. Users shouldn’t need to know which layer they are transacting on, much like how internet users don’t need to understand TCP/IP protocols. They simply benefit from faster transactions, lower costs, and improved products.
This natural evolution of blockchain architecture represents a significant advancement. Layer-3s balance independence with interoperability. They optimize cost efficiency without compromising security. They allow for specialized enhancements while maintaining connections within the ecosystem. These features are not just beneficial; they are essential for blockchains to achieve mainstream acceptance.
The internet soared not because users grasped packet-switching or HTTP protocols, but because it functioned seamlessly. Layer-3s bring us closer to a blockchain landscape that operates smoothly—swift, efficient, and affordable. That’s the pathway to success for crypto.