Exploring Level-3 Blockchain: What's new?

Blockchain technologies have been steadily evolving for the past 15 years. During this period, the system has significantly expanded, hundreds of analogs of the first cryptocurrency have emerged, along with new problems.

One of such problems – scalability – is now coming to the forefront. It is associated with the initial limitations of the system, which seemed to be designed for greater demand but turned out to be unprepared for it greater. What attempts are being made today to solve the problem of blockchain scalability? Let's delve into it.

Scalability of blockchain networks - what is it?

Scalability in blockchain refers to the ability to process a large number of transactions without harming other elements of the system. Achieving this is possible through updates, and if the base were centralized, it would be much easier to do so. However, since Bitcoin (BTC) was originally created on the principles of decentralization, i.e., using distributed governance, updating and synchronizing all its parts are necessary.

Doing so is not so simple. That's why developers of different networks are currently racking their brains over scalability issues. The question is how to update the blockchain comprehensively while maintaining both security and decentralization?

Second-level solutions (L2)

A while ago, blockchain came a few steps closer to its "ideal version", when second-level solutions were released. This formed what is called the second-level blockchain – a protocol deployed on top of the first-level blockchain (Layer 1).

Features of L2 systems:

• Suitable for platforms with low throughput;
• Increase the scalability of networks;
• Do not replace the main network but are integrated into it (have shared smart contracts and crypto assets);
• Reduce transaction fees and make crypto exchanges more accessible.

Thanks to the creation of second-level solutions, blockchains were able to gain widespread adoption without limitations. More people around the world began using cryptocurrencies, new progressive projects emerged - the crypto industry gained the opportunity to develop and adapt to modern reality. However, L2 solutions did not provide complete idyll. Once again, the blockchain needed an update as its capabilities reached a "ceiling" again. This time, third-level solutions were released.

Modern Problems Require Modern Solutions: Layer 3

Third-level solutions for blockchain networks are new protocols that, analogous to second-level solutions, transform the existing system, making it more scalable and convenient for further operation. L3 solutions are superimposed on existing L2 solutions and expand functionality without changing the underlying code.

If L2 solutions eliminated the problems of network low throughput, significantly increased the number of processed transactions, and reduced fees, then L3 solutions went even further. Their functionality includes:

• Customizable scalability design. At this new level of blockchain, network developers will be able to independently adjust parameters for individual applications, considering power, load, and data formats.
• Customizable functionality development. Now, new applications launched in L3 networks can be tailored to any request. One such request is for privacy. It is reported that the new update will provide the ability to conceal certain information about transactions and not display it on the second level.

What L3 solutions already exist?

Ethereum network developers are actively working on transforming their blockchain and improving the entire crypto and DeFi industry. In 2024, the launch of an L3 update called Superchain is planned, which was based on the L2 solution Optimism. The technological stack of OP Stack underlies it. Developers are refining ideas for creating parallel second-level solutions for greater process optimization.

Another project in the developing L3 industry is Orbit. This is a product of Offchain Labs, the company that created the L2 solution Arbitrum. Based on the new solution, unique dApps, NFT projects, and Web3 games are already being created.

The publicly available third-level network Pathfinder launched in test mode on top of the Ethereum blockchain in 2023. Developers have stated that L3 solutions are capable of creating a new ecosystem of interconnected blockchains based on zkEVM, referred to as "hyperchains."

Conclusion

In conclusion, it is worth noting that the blockchain space continues to release updates with the main goal of improving network performance. Solving the scalability problem (one of the most pressing issues now) will expand the existing functionality of networks and make their operation more stable, fast, reliable, and secure for users. Also, the introduction of L3 protocols and their combination with second-level solutions helps address fragmentation issues in the crypto space.

Third-level solutions tackle tasks such as:

- Scalability

- Development of dApps and DeFi sector

- Expansion of functionality and possibility of individual settings

- Resolving compatibility issues

The development of L3 solutions is not a whim of large corporations busy attracting new clients but a necessity directly related to the stable operation of the entire blockchain space.

If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Liquid Restaking Protocols: the New DeFi Primitive” and “Payment Reconciliation”.

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