What are Multi-Layered Blockchains?
Blockchains are usually distributed ledgers that allow users to store verified information on various servers that are called nodes. Depending on their features and designs there are many different types of blockchains. Multi-layered blockchains consist of several layers of programming protocols to address the blockchain trilemma.
Blockchain Trilemma is a theory that postulates that it is impossible to solve three defining features of a blockchain namely decentralization, scalability, and security. The theory talks about the technical constraints of having to compromise on the remaining features when incrementing one of them on the first layer.
Therefore, multi-layered blockchains allow the developers to upgrade each core feature on a different network layer.
Use Cases of Multi-Layered Blockchains
As mentioned before, multi-layered blockchains allow the developers to solve blockchain trilemma. It means that developers can add the features compromised on Layer-1 on the second layer.
In most cases, Layer 2 blockchain networks are used to introduce additional scalability on a blockchain. However, the layer 2 networks can in turn decrease the ability of a blockchain network to interact with other blockchains or its interoperability.
For example, Uniswap and SushiSwap are layer 2 networks operating on the Ethereum blockchain. Therefore, the users have to use a third-party or intermediary channel to transfer the tokens from this blockchain network to a new network.
This results in higher transaction costs, and more transaction processing time due to interoperability constraints. Therefore, the logical solution is to increase the interoperability using a third layer (L3) on the network.
What is a Layer 3 Blockchain?
A Layer 3 blockchain network is usually a standalone network with cross-chain features that connects its native main network with other blockchains. In this manner, the blockchain with a L3 does not have to rely on intermediaries or third-party channels to make token transfers.
In most cases, L2 and L1 work in tandem with each other thus L3 is created as a separate layer. It is not wrong to say that L3s simplify all layers on a blockchain network. They operate as a messenger between Layer-1 and Layer-3 making way for a faster flow of information.
Layer 1 Vs Layer 2 Vs Layer 3 Blockchains: Key Differences
Here are some differences between L1, L2, and L3 blockchain networks:
Layer-1 blockchains are on-chain networks while Layer 2 is added for incrementing the scalability of a given network. On the other hand, L3 networks are used for adding more interoperability.
Layer-1 and Layer 2 blockchains are able to correspond and operate as interactive layers. However, layer 3 is often an independent blockchain layer that adds cross-chain networking option for the blockchain.
Layer 2 enhances the transaction capacity of the base layer by rerouting computational work with alternative channels. Layer 3, on the other hand, is used to optimize specific features for L2 such as privacy, app-specific services etc.
Popular Layer 3 Blockchains
Quant Network is a popular layer 3 solution that has multi-ledger and multi-DLT smart contracts based on its Overledger protocol.
It is one of the first crypto projects to introduce L3 for cross-chain capabilities building on L2 protocol named Overledger. Overledger has partnered with companies such as Nvidia, Hyperledger, and Oracle.
Ripple’s Interledger Protocol or ILP employs the following blockchain layers namely blockchain ledgers, LANs, and Interledger protocol. ILP is working on integrating a layer 3 network to enable faster and more economic transactions on Ripple.
Cosmos Inter-blockchain communication protocol or IBC also contains three layers namely Tendermint Core, Cosmos-SDK, and IBC. In this manner, the applications that rely on inter-module communication protocol can utilize IBC. Two of its most quoted features are cross-chain asset transfers and multi-chain smart contracts.
L3 blockchain networks are a developing entity layer that has a functional fluidity. With the passage of time, developers are adding more features to this layer to enable better interoperability and remove the constraints for network operators.