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2. Intermediate Course

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  1. 1. Ethereum 2.0 - What is it? 
  2. 2. What is cryptocurrency burning?
  3. 3. How to create your own cryptocurrency? 
  4. 4. Blockchain Oracle - what are oracles? 
  5. 5. How to make money with NFT?
  6. 6. What is an ERC20 token and how is it created?
  7. 7. The Metaverse – a new virtual world
  8. 8. Metaverse – TOP 15 virtual reality projects
  9. 9. Technical analysis – is it worth using?
  10. 10. What are DeFi liquidity pools?
  11. 11. Second layer (layer 2) - what is it? 
  12. 12. What are wrapped tokens 
  13. 13. What is the Lightning Network, and how does it work?
  14. 14. What are security tokens?
  15. 15. What is Play-to-Earn (P2E) and how does it work?
  16. 16. What are Social Tokens? 
  17. 17. Examples of the use of WEB3 on the blockchain
  18. 18. What is Web5? 
  19. 19. Ethereum London Hard Fork - what is it ? 
  20. 20. Segregated Witness - what is Segwit Bitcoin all about?
  21. 21. Polkadot - Decentralized blockchain and DOT cryptocurrency
  22. 22. Polkadot Parachain - Next-generation blockchain
  23. 23. Trading order types: stop loss, trailing stop loss, LIMIT
  24. 24. Set up of Stop Loss and Take Profit orders
  25. 25. What are Decentralized Cryptocurrency DEX Exchanges?
  26. 26. What is Curve Finance?
  27. 27. What is GameFi and how does it work?
  28. 28. Non-fungible tokens and NFT exchanges
  29. 29. Cryptocurrency steps - What is move to earn M2E?
  30. 30. What is Proof of Reserves (PoR)? How does it work?
  31. 31. Interoperability in the world of cryptocurrencies and blockchain
  32. 32. Blockchain and its layers - What is layer three in Blockchain (L3)?
  33. 33. What is Layer 0 in Blockchain technology?
  34. 34. What is layer 1 in Blockchain?
  35. 35. What is MakerDAO and DAI Stablecoin?
  36. 36. What is Blockchain sharding?
  37. 37. What is the NFT licence fee?
  38. 38. What is the SubDAO protocol, and how does it work?
  39. 39. The main differences between static NFT and dynamic NFT
  40. 40. What is minting an NFT?
  41. 41. Mainnet versus Testnet on the Blockchain. The complete guide!
  42. 42. What are NFT Ordinals? A guide to Bitcoin NFT.
  43. 43. Market Cap versus Fully Diluted Market Cap - the most important differences you should know!
  44. 44. MINA Protocol: the lightest blockchain in the world!
  45. 45. NFT Gas Fee - what is it? How can you reduce your gas fee?
  46. 46. Liquidity Provider Tokens (LPs). What are they, and why are they so important?
  47. 47. What is KnowOrigin NFT, and how does it work?
  48. 48. What is decentralized social media?
  49. 49. What is the Ethereum Name Service (ENS) and how does it work?
  50. 50. Arbitrum: Ethereum scaling solution - everything you need to know
  51. 51. Ethereum ERC-4337 - what is it and how does this standard work?
  52. 52. Sustainable Blockchain - Proof of Useful Work & Flux
  53. 53. Ethereum Proof-of-Stake (PoS) - what should you know?
  54. 54. Atomic Swap: What is an atomic swap, and how does it work with cryptocurrencies?
  55. 55. What Is Cryptocurrency Vesting? What Are Its Advantages?
  56. 56. What Is the Metaplex Candy Machine Protocol? How Does It Work?
  57. 57. What Is the BNB Greenfield Ecosystem?
  58. 58. Real Yield in DeFi - what is this trend? What does it consist of?
  59. 59. What Is Slashing in Cryptocurrencies?
  60. 60. How to Create Your Own Decentralized Autonomous Organization (DAO)?
  61. 61. The ERC-721X VS ERC-721 Standard – Key Differences!
  62. 62. Royalties – What Are They? How Does This Type of Licensing Fee Work?
  63. 63. Polygon 2.0 - the value layer for the Internet
  64. 64. ERC-6551 - the new NFT standard. What does it bring to the non-exchangeable token sector?
  65. 65. What is TradFi? The importance for cryptocurrencies!
  66. 66. What is the Real World Asset (RWA) trend in cryptocurrencies? Explanation and examples!
  67. 67. Pyth Network: a powerful oracle harnessing the power of Solana!
  68. 68. Vampire Attacks in Decentralized Finance (DeFi): Explanation and Examples
  69. 69. What are stables in the world of cryptocurrencies?
  70. 70. What Is Binance Oracle?
  71. 71. What is NFT Lending all about? An innovative solution in the world of cryptocurrencies!
  72. 72. Shibarium: A new era in the Shiba Inu ecosystem?
  73. 73. What is an ETF? How will an exchange-traded fund on bitcoin work?
  74. 74. Symmetric and asymmetric encryption - key cryptography techniques!
  75. 75. Cosmos SDK: Building the Blockchain Ecosystem
  76. 76. DAO Investment: A revolution in the world of finance and investment
  77. 77. What is cross-chain interoperability in Blockchain technology?
  78. 78. Blockchain trilemma - explanation of the problem. What is the impact on cryptocurrency payments?
Lesson 32 of 78
In Progress

32. Blockchain and its layers – What is layer three in Blockchain (L3)?

Blockchain, due to the lack of a centralized authority, needs to be even more secure. At the same time – scalable to cope with the growing number of users, data, and transactions. In today’s lesson, we will discuss solutions and determine exactly what is the Layer 3 (L3)in Blockchain, which are supposed to provide greater scalability and maintain the highest level of protocol security.

What is layer three of blockchain technology?

These are basically unique solutions that enhance blockchain networks with cross-chain capabilities. Then blockchain achieves full interoperability. Imagine layer three protocols as a simplification of all layers. Someone, like a messenger between layer 1 and layer 2.

As a rule, Layer 1 and Layer 2 solutions are closely related. So creating interoperability protocols on another layer is a super idea. As a result, Layer 3 solutions were created.

Here it should be emphasized that the entire Tier 3 system does not rely on any custodian or intermediary.

Why does blockchain architecture need a third layer?

1. Blockchain trilemma

The three main elements of blockchain are decentralization, security, and stability. In practice, almost every blockchain-based project must sacrifice one of these elements to achieve better performance.

Let’s look at examples. Ethereum and Bitcoin focus mainly on security and decentralization. Solana – on stability and security.

The scalability trilemma is difficult to solve, relying wholly on layer 1. Therefore, a multilayer structure is better and achieves stability, security, and decentralization.

2. Blockchain interoperability

The multi-level structure of blockchain technology solves perfectly the problem of scalability. Recall – blockchain interoperability is cross-chain functionality. This means that two different blockchain networks with the same ecosystems can communicate with each other. With the others – no.

Layer 3 solutions of blockchain technology become a necessity when you think about popular DeFi applications. Aave and Serum run on different networks. As a result – access to services on these platforms are not possible for everyone. As a result, the lack of interoperability between blockchain, is the main reason for the introduction of Layer 3 solutions.

Examples of Layer 3 protocols

Many new projects using Layer 3 have emerged with protocols using interoperability. Here are some examples.

Interledger

Interledger or ILP by Ripple is one of the most popular protocols using Layer 3 solutions that exists on the market.

It features a multi-layered ecosystem with three distinct layers that have separate functions. Layer 1 acts as the blockchain’s highway ledger, while Layer 2 contains the local area network or LAN. Layer 3, on the other hand, provides faster and more profitable transactions on the blockchain Ripple.

IBC

Otherwise, known as the Inter-Blockchain Communication Protocol of Cosmos. The Layer 1 protocol is the well-known Tendermint Core. Cosmos SDK facilitates the functionality of Layer 2. Layer 3, or IBC protocol, helps applications communicate reliably and securely between modules of the blockchain. It transmits data, is responsible for authentication and works across multiple blockchain networks.

Quant

This is a great solution for blockchain networks of different companies. It helps connect public and private chains. It uses Overledger DLT to facilitate interoperability. Furthermore, it’s also a great Layer 3 solution.

Vitalik Buterin and his vision for Tier 3 solutions

The co-founder of Ethereum has his specific vision for Layer 3 solutions. Layer 2, and in fact its solutions based on Ethereum, focus on scaling the network.

Vitalik’s idea is for the layer 3 counterparts to have a different purpose and provide functionality to the protocols.  According to him, in the near future, this is what Layer 3, which is being worked on extensively, will be used for.

According to the co-founder of Ethereum, the emergence of a third layer in blockchain technology only makes sense if it provides much more functionality than the available layer 2.

Another suggestion for Layer 3 operations would be to scale down applications that do not want to use the Ethereum Virtual Machine (EVM)in their operations to perform complex calculations.

The Ethereum co-founder’s ideas are great, but nevertheless it is worth rethinking whether Layer 3 protocols will actually be more efficient than the proposed Layer 2 models.

Summary

Blockchain’s Layer 3 can change the way they operate in the market. The goal of Layer 3 is to achieve full interoperability, using uncomplicated and compatible blockchain systems. Layer 3 brings solutions, mass adoption of cryptocurrencies and blockchain.