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Blockchain technology has become the center of innovation since its inception. Blockchain experts are focusing on solving the blockchain trilemma. Layer 3 blockchain protocols are the next step in solving such issues.
Last updated Oct 25, 2022 at 12:37 AM
Posted Oct 15, 2022 at 01:00 PM
Layer2 vs Layer3 architecture
Layer 2 protocols, like layer 1 blockchains, have various characteristics that set them apart. Layer 2 standard services are typically connected with certain blockchain systems. The Lightning Network, for example, is designed particularly for Bitcoin, whereas the Optimism protocol is designed for Ethereum.
The important concern on everybody's mind when thinking about layer 3 solutions in the blockchain is whether they are necessary. Anyone involved with the blockchain space has probably heard of the blockchain trilemma. The phenomenon throws three crucial characteristics against each other, and blockchain networks are frequently stuck on which feature to skip.
Surprisingly, the origin of blockchain layers began with the trilemma, implying that blockchain networks could only achieve two out of the three features. Let’s discuss the blockchain trilemma and its importance to understand whether blockchain requires layer 3 protocols or not.
The blockchain trilemma consists of three components:
Nearly every single blockchain initiative must forego one of the elements to boost performance with the other two. The trade-offs can be found in common instances such as Ethereum and Solana. Ethereum and Bitcoin networks are more focused on security and decentralization, whereas Solana is more concerned with stability and security. The scalability component is a difficult problem to solve when merging the three parts in a layer 1 blockchain. A multi-layer structure can provide an efficient and cost-effective solution that is specifically customized to provide scalability, security, and decentralization.
Source: MDPI
The key argument for integrating multi-level architecture in blockchain networks is that it is the best solution to scalability issues. Layer 2 blockchain solutions can help with scaling concerns. So what is the need for layer 3 blockchain projects? In reality, the blockchain trilemma is not the only serious worry that crypto market participants are facing. Furthermore, layer 2 solutions do not address compatibility issues. Layer 2 protocols do not allow for information display, accessibility, or exchange across computer networks.
In the blockchain sector, interoperability is sometimes known as cross-chain capability. It means that two distinct blockchain networks, each with its own ecosystem, might connect and conduct transactions without the use of centralized middlemen. It is, for example, nearly impossible to shift BTC to the Ethereum platform and utilize it across numerous DeFi apps. Almost all systems that allow you to trade cryptocurrency across numerous dApps and DeFi solutions have some type of centralized control.
The interaction of layer 2 and layer 1 solutions necessitates the implementation of interoperability standards on a separate third layer. If you want to know "What is a Layer 3 in blockchain?" you should be aware of the numerous variations between layer 2 and layer 1 blockchains. Layer 3 attempts to solve the issue of interoperability while keeping processes in the underlying levels simple.
Layer 3 focuses on the development of various variables such as technologies, functionalities, and features for servicing consumers in various ecosystems. The development of such distinctions via layer 3 or L3 protocols aids the communication, connection, and interaction of various networks and ecosystems.
An analysis of each Layer 3 standard type demonstrates how they work to solve interoperability issues. They function similarly to network technology and facilitate data transport in packets. The benefits of layer 3 solutions include quantifying value in packets as well as routing value packets across multiple DLT networks. As a result, layer 3 protocols can provide effective communication between layer 1 and layer 2 chains, as well as the applications and services contained inside them.
Layer 3 solutions must provide evidence. Many new layer 3 projects have developed interoperability standards to help connect disparate blockchain networks and layer 2 services or protocols. Let's look at some of the best layer 3 blockchain projects you should check out.
The interesting application of integrating blockchain layers in the creation of fresh blockchain projects is Cosmos' IBC (Inter-Blockchain Communication) protocol. A closer examination of Cosmos' architecture reveals that it uses a three-layer layout.
Connection in IBC Protocol
Layer 1 standard functionality is provided by the Tendermint Core; layer 2 protocol functionality is provided by the Cosmos-SDK. The IBC protocol can provide dependable and secure inter-module communication for any application. Furthermore, the IBC protocol can be used to discover the benefits of multi-chain smart contracts as well as cross-chain asset transfers.
IBC, as one of the top layer 3 protocols, enables a dependable and safe module for blockchain network interconnection. It helps with a variety of functions such as data transmission, authorization, and ordering across numerous platforms.
Quant is the second most common example among layer 3 blockchain technologies. Quant was created as a dependable solution for enterprise blockchain networks, assisting in the connection of public and private networks. Quant uses the Overledger DLT gateway, as well as several other unique technologies, to facilitate interoperability.
Quant's major features include multi-ledger coins as well as multi-DLT smart contracts. On top of that, the layer 3 protocol has formed alliances with well-known companies like Oracle, Hyperledger, and Nvidia.
Ripple's Interledger Protocol (ILP) is the most prominent layer 3 solution out there today. Ripple is a multi-layer framework with three unique layers that provide different functions. Layer 1 serves as the blockchain ledger, whilst Layer 2 includes local area networks (LANs).
ILP Working
On top of that, Ripple's layer 3 protocol, Interledger Protocol, intends to deliver quicker and more affordable payments on the Ripple network. Ripple's Interledger Protocol, as one of the best-known layer 3 blockchain protocols, provides an effective path for enabling connectivity in the blockchain sector.
ICON is a one-of-a-kind layer 3 protocol that may be used as a stand-alone option. The most notable achievements of ICON as a layer 3 protocol are its collaborations with the Seoul government and Samsung. The interconnection protocol connects several blockchain networks by aggregating all blockchain data on a single layer. ICON is a legitimate option for establishing a single uniform assembly of various blockchain networks.
The evaluation of layer 3 solutions demonstrates how they might lead the way for the future of blockchain. Interoperability is one of the most significant barriers to widespread blockchain use. Simultaneously, L3 protocols can help increase the use of digital assets outside of financial applications. If blockchain causes ripples in digital transformation, layer 2 and layer 3 solutions can assist organizations in navigating the waves of blockchain adoption.