“ The content described in this article is a compilation of online public information and articles, with additional personal comments and understanding.”
01 Layer 1 — The foundation of blockchain
Layer 1 is like the foundation of the blockchain world. It is the bottom blockchain protocol and the cornerstone of all other layers, defining the basic rules and protocols of the blockchain. It is responsible for recording and verifying all transactions, with very strict rules, and maintaining the security and decentralization of the entire network, with extremely high security and fairness. Layer 1 is like the earliest infrastructure highway in a city, which is very basic but very stable. Then, with the subsequent expansion of the city, it will lead to crowding and gradually reduce efficiency.
question:
Scalability: As the number of users and transaction volume increases, the Layer 1 network may become congested, resulting in slower transaction processing and longer confirmation times. This limits the ability of blockchain to handle large-scale applications.
Transaction fees: In order to incentivize miners or validators to process transactions, Layer 1 networks usually need to pay a certain fee (such as Ethereum’s Gas fee). During times of network congestion, these fees can increase significantly, making small transactions uneconomical.
Energy consumption: Some Layer 1s (such as Bitcoin, which uses the PoW consensus mechanism) consume a lot of energy during the mining process, which raises environmental and sustainability issues.
Network congestion: During periods of high demand, such as when the cryptocurrency market is booming, the Layer 1 network may become congested due to too many transactions, affecting the user experience.
Upgrades and Updates: Changes and upgrades to protocols in Layer 1 usually require broad consensus from the entire community. For example, in other blockchains such as Ethereum, changing the protocol may involve consensus from core developers, miners, users, and other network participants. This can lead to a slow and complex upgrade process, and sometimes even cause community divisions.
Privacy protection: Although Layer 1 provides a certain degree of anonymity, some applications (such as financial transactions) may require a higher level of privacy protection, which may be difficult to achieve on Layer 1.
Typical cases:
Bitcoin, Ethereum
02 Layer2 — Scalable blockchain
Layer 2 is a series of technical solutions built on top of the blockchain main chain (Layer 1) to improve the scalability and other performance of the main chain while maintaining or enhancing its security. The main solution reduces the burden on the main chain by processing transactions and smart contracts outside the main chain, thereby achieving faster transaction confirmation, lower transaction fees and higher throughput.
Layer 2 technologies include state channels, side chains, Plasma, Rollups (such as Optimistic Rollups and zk-Rollups), etc. They allow users to conduct transactions outside the main chain, and then submit the transaction results to the main chain after aggregation, so as to optimize the operation of the entire blockchain network. It can achieve faster transaction speeds and lower transaction fees, while increasing the throughput of Layer 1 without sacrificing security.
If you compare Layer 2 to a subway or light rail in a city's transportation system: Imagine that the city's main roads (Layer 1) are very congested during rush hour, vehicles (transactions) move slowly, and parking fees (transaction fees) are high. To alleviate this pressure, the city builds a subway or light rail system (Layer 2), which runs outside of ground transportation and provides a faster and cheaper way to travel.
Main issues:
Security: The security of Layer 2 solutions directly depends on the underlying main chain. If the main chain has vulnerabilities or is attacked, Layer 2 assets may also be affected. In addition, Layer 2 solutions themselves may have security risks, such as smart contract vulnerabilities.
Decentralization: Some Layer 2 solutions may introduce centralized elements, such as operators, validators, or regulators. This may be contrary to the decentralized concept of blockchain and may lead to security and credibility issues.
Interoperability: Different Layer 2 solutions may adopt different technologies and standards, which may lead to interoperability issues between them. This challenge may need to be solved by developing more standards.
User experience: Using certain Layer 2 solutions may require users to perform additional steps, such as opening and closing channels, which may affect user convenience and experience.
Fund lock: Some Layer 2 solutions may involve locking funds in channels, which may affect users’ flexible use of their funds. Fund lock may also lead to some fund efficiency and liquidity issues.
Typical cases:
03 Layer3 — Advanced Custom Solutions
Layer 3 is a more advanced blockchain solution built on top of Layer 2. It can be seen as an "advanced functional area" tailored for specific needs. It allows developers to design and implement a more flexible and efficient blockchain environment based on specific application requirements, such as more complex smart contracts, privacy protection, high-performance processing, cross-chain interoperability, etc. The goal is to inherit the security of Layer 1 and the scalability of Layer 2, while providing additional innovative features so that blockchain technology can better serve a variety of industries and use cases.
Layer 3 can be likened to a customized service in a city. Just like in a busy city, although there are public transportation systems (Layer 1) and rapid transit (Layer 2) to meet the basic travel needs of most people, sometimes people need more personalized services, such as private drivers (Layer 3). Private drivers (Layer 3) can provide customized services based on the specific needs of passengers (users or developers).
Main issues:
Technical barriers: Layer 3 solutions generally require more advanced technical knowledge to develop and maintain, which may limit only those developers and teams with the corresponding skills to fully utilize these technologies.
Standardization and interoperability: Since Layer 3 provides highly customized services, this may lead to standardization and interoperability issues between different solutions. Just as different private customized services may be difficult to be compatible with each other, different implementations of Layer 3 may require additional work to achieve interoperability.
Security and reliability: The pursuit of high customization may introduce new security risks. Developers need to ensure that the security and reliability of the system are not sacrificed when implementing specific functions.
User acceptance: Layer 3 applications may require users to adapt to new interaction methods and concepts, which may affect user acceptance and adoption, especially for those who are accustomed to traditional blockchain services.
Ecosystem development: The success of Layer 3 depends heavily on a healthy ecosystem of developers, users, and partners. Building such an ecosystem takes time and resources, and may face competition from existing Layer 1 and Layer 2 solutions.
Regulatory challenges: As Layer 3 technologies develop, new regulatory issues may arise. Regulators need to ensure that these new technologies operate within a compliance framework while not inhibiting innovation.
Cost and resource consumption: Developing and maintaining Layer 3 solutions may require more resource investment, including time, money, and manpower. This may increase the cost of the project and affect its economic viability. Despite these challenges, Layer 3 technology still offers great potential for the future development of blockchain, especially in driving innovative applications and solving specific industry problems. As the technology matures and the community works together, these issues are expected to be resolved.
As a relatively new concept, Layer 3's main applications are still in the exploration and development stage. The goal of Layer 3 is to provide more advanced customization and optimization to support more complex blockchain applications. However, some projects may be classified as Layer 3 in the future, especially those that provide additional optimization and customization services based on Layer 2. For example, if a project builds a specific application on top of a Layer 2 solution such as Arbitrum or Polygon and provides functionality beyond the standard services of Layer 2, then this project may be considered an example of Layer 3.
Typical cases:
Decentralized identity management: Several projects are working to build decentralized identity management protocols on the blockchain for more secure and privacy-preserving authentication and identity management.
Blockchain games and virtual worlds: Blockchain technology is widely used to build decentralized games and virtual worlds, allowing players to truly own and trade digital assets in the game.
Distributed file storage and sharing: Some blockchain projects attempt to build distributed file storage and sharing protocols, allowing users to securely store and share files.
Smart Contract Platforms: In addition to Layer 1 smart contract platforms such as Ethereum, there are also attempts to build more powerful smart contract platforms at a higher level.
Supply chain management: The application of blockchain in supply chain management can also be seen as a Layer 3 application, involving higher-level protocols and smart contracts.
Comparison and comparison of the three major layers |
A. Why do we need Layer 2 and Layer 3?
Layer 2 is designed to solve the scalability problem of Layer 1, allowing blockchain to process more transactions, reduce costs, and improve user experience. This is crucial for the widespread application of blockchain technology, especially in finance, games, supply chain and other fields.
Layer 3 is designed to provide more advanced services and functions to meet the complex needs of specific industries and applications. It allows developers to create more innovative and efficient solutions and promote the application of blockchain technology in more areas, such as decentralized finance (DeFi), decentralized applications (dApps) and cross-chain communication.
In general, the emergence of Layer 2 and Layer 3 is to overcome the limitations of Layer 1 and make blockchain technology more flexible, efficient and secure, thereby supporting a wider range of application scenarios and innovations.
B. What is the difference between Layer1, Layer2 and Layer3 DApps?
Both Layer 1 and Layer 2 can develop decentralized applications (DApps), but they differ in performance, cost, and development complexity. Layer 3 provides more advanced customization capabilities, which may be critical to the development and operation of DApps in some cases.
Layer 1 DApps：
DApps developed on Layer 1 run directly on the main chain, which means they fully inherit the security and decentralization characteristics of the main chain. However, due to the scalability limitations of Layer 1, these DApps may face high transaction fees and slow processing speeds, especially when the network is congested. DApps developed on Layer 1 usually need to pay gas fees, which may affect the user experience, especially when processing a large number of small transactions.
Typical applications - Ethereum Dapps:
Uniswap: A decentralized exchange that allows users to trade various ERC-20 tokens directly on-chain.
Compound: A decentralized lending platform where users can borrow or deposit crypto assets to earn or pay interest.
Decentraland: A virtual reality platform where users can buy, develop, and sell virtual land.
Layer 2 DApps：
Layer2 provides a way to process transactions outside of the main chain, which can significantly improve the performance of DApps and reduce transaction costs. DApps running on Layer 2 can enjoy faster transaction confirmation times and lower gas fees, which makes them more suitable for processing high-volume transactions, such as payments and games. However, Layer 2 solutions can introduce new complexities, and developers need to understand how to interact between Layer 2 and Layer 1.
DApps on Layer 2 improve performance and reduce costs by processing transactions off-chain while maintaining the security of Layer 1. They usually interact with Layer 1 through specific Layer 2 solutions such as Rollups or sidechains.
Typical Application-Arbitrum:
Arbitrum Rollup: Supports various DApps, such as Uniswap V3, which processes transactions off-chain through Optimistic Rollup technology and then submits them to the Ethereum main chain.
Gitcoin: A decentralized platform for funding open source projects, also runs on Arbitrum to reduce transaction costs.
Typical application - Polygon (formerly known as Matic):
QuickSwap: A decentralized exchange on Polygon that provides similar functionality to Uniswap, but with faster transactions and lower fees.
Aave on Polygon: The Polygon version of Aave, allowing users to borrow and lend on the Polygon sidechain.
Layer 3 DApps：
Layer 3 provides more advanced customization capabilities based on Layer 2, allowing developers to create highly optimized environments for specific application scenarios. On Layer 3, developers can customize consensus mechanisms, transaction processing logic, privacy protection measures, etc. to meet the needs of specific DApps. Layer 3 DApps can provide richer features, such as more advanced smart contracts, better user experience, and stronger privacy protection. However, the development of Layer 3 may require more advanced technical knowledge and may face greater regulatory uncertainty.
The concept of Layer 3 is relatively new, and there may not be widely recognized Layer 3 DApps in the market yet. Layer 3 generally refers to solutions that provide more advanced customized services on top of Layer 2. These services may include more complex smart contracts, privacy protection, cross-chain interoperability, etc. Since the definition and implementation of Layer 3 may vary from project to project, specific DApps examples may need to be determined based on specific Layer 3 projects.
In general, Layer 1 provides the most basic DApp development environment, Layer 2 provides performance optimization, and Layer 3 provides a highly customized development platform. Developers need to weigh these factors when choosing a development environment to ensure that their DApps can meet user needs and remain competitive.
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