Ethereum is famous for its smart contract and decentralized app support, unlocking a whole new world of opportunities for crypto developers. If you already own Ethereum, ETH to USD and USD to ETH conversions may be a regular thing for you. While using the bullish market ensures a decent chance of profit, you can also consider expanding your portfolio by utilizing layer-3 cryptos.
A layer-3 blockchain focuses on decentralized app creation. It addresses issues like app performance and privacy, with the main tendency to improve the overall user experience. If you’d like to learn more, here are the key features and best layer-3 cryptos to watch!
Key Features of Layer 3 Scaling Solutions
Layer-3 solutions are new additions to blockchain structures built on top of layer-2 networks. The main idea of a layer-3 blockchain is to bridge different blockchains, allowing transactions between them. Thanks to them, you can transact via different chains seamlessly, which secures a function that layer-2 networks can’t deliver.
Here are the top features of layer-3 blockchain infrastructures:
- Securing optimal performance and efficiency. Layer-3 solutions ensure decentralized apps can perform optimally because a single network only hosts one app, providing a dedicated environment and its own set of rules. That ensures there aren’t bottlenecks or network congestions.
- Improved transaction processing. The scalability offered by layer-3 networks is achieved by ensuring optimal data structure and enhanced consensus mechanism. That enables better transaction processing, leading to decreased costs for traders.
- High customization levels. You can deploy independent blockchains on layer-3 solutions, meaning that each hosted dApp can have a customized environment that best fits the developers’ preferences.
If you need some investment suggestions, you can check 5 crypto projects on Ethereum to learn what can be built on the Ethereum blockchain.
Layer 1 vs. Layer 2 vs. Layer 3
For a blockchain infrastructure, Layer 1 is crucial. It’s the foundational layer that developers make from scratch. This is where transaction finalization and block addition occur.
The problem is that you can’t make a layer-1 structure that maximizes security, decentralization, and scalability. Therefore, most developers sacrifice the last, and that’s what layer-2 solutions cover, introducing various mechanisms to process transactions off-chain, thus improving throughput.
Layer-3 chains are independent and highly customizable. They help build an interoperable ecosystem and deliver a solution to tackle a specific functionality, such as improved transaction speed.
| Trait | Layer-1 | Layer-2 | Layer-3 |
| Purpose | The foundational network layer | Overlays layer-1 to add scalability and efficiency | Acts as a dApp host and serves certain functions |
| Examples | Sharding, consensus mechanism | ZK rollups, Lightning Network | Decentralized apps and games |
| Interactivity | Mostly within the chain | Interacting with layer-1 | Interacting with layer-2 solutions and dApps |
Best Layer 3 Crypto to Watch
Keeping track of the crypto advancements is vital for all stakeholders, from developers to traders. Layer-3 cryptos started attracting lots of attention, and here are the top projects to watch in the coming months and years!
1. Cosmos (IBC Protocol)
IBC is short for the Inter-Blockchain Communication. It wasn’t a surprise when the creators announced that connecting Cosmos to Ethereum was among the goals of the IBC implementation. The open-source protocol aims to enable data transport and authentication between chains on the Cosmos network to transfer tokens, messages, and data effortlessly.
IBC allows building a blockchain to your specifics to guarantee the highest possible degree of sovereignty. At the same time, it offers native integration with Cosmos SDK chains. Some popular projects using the IBC protocol are Axelar Network, Band Protocol, Osmosis, and Fetch.AI.
2. Orbs
Orbs now works with multiple protocols, including Avalanche, Ethereum, Polygon, and BNB Chain. The layer-3 project offers a proof-of-stake (POS) consensus mechanism and acts as an intermediary executor.
The idea is to improve smart contract functionalities by supporting more complex scripts. Orbs offers protocols like dTWAP, dLIMIT, and Liquidity Hub. The last aims to tackle the issue of fragmented liquidity in DeFi. It allows exchanges to use external sources to enhance liquidity and offer better swap prices.
The native ORBS token allows governance and staking flexibility across multiple chains. Orbs has been around since 2017, making it a pioneer in blockchain structure innovation. A single ORBS token is now worth around $0.04.
3. Degen Chain
Degen is a meme token built on Farcaster. It’s a social media platform delivering a web3 user experience. Although it’s only been around for a few months, Farcaster has made huge success in the industry. Its protocol is now a host to many apps, such as Warpcast.
A community on Farcaster called Degen launched the DEGEN coin. It was a way of having fun and mocking those who enjoy speculative and high-risk trading, which are also called degenerates within the community.
Surprisingly, DEGEN became an interesting utility. As a payment option, it supports fast transactions. That’s how it quickly achieved a $100 million transactional volume. A single DEGEN token is now worth only $0.02.
Conclusion
Layer-3 solutions are an important innovation in the crypto world. They ensure the developers can build an app-specific blockchain with high customization. The layer-3 infrastructure secures interoperability between different chains built on the same network.
These layers unlock new opportunities for intriguing crypto projects that could be interesting for investors. Some exciting options to consider now are mentioned in the article, but don’t hesitate to explore other variants to find a potential future investment gem!