A Layer 3 Blockchain and its contribution to eliminating Interoperability Problems
Did you know about the total capitalization of Bitcoin? It was over $1 trillion, according to the data of April 2021. Even Ethereum (one of the alternatives to Bitcoin) is expanding at a faster pace, thanks to the development of the DeFi ecosystem. And it has led to the further growth of decentralized applications. Moreover, the demand and popularity of multi-layer blockchains are on the rise, which is favoring the likelihood of the layer 3 protocols’ implementation in the blockchain ecosystem.
Do you wonder what basically layer 3 protocols are? These protocols come as distinct ways to improve various blockchain networks owing to the power of cross-chain technology. The layer-3 solutions aim at gaining interoperability in the real sense without any interference from middlemen or custodians. Did you know layer 3 solutions are somewhat similar to that of the internet’s layered structure?
Layer 2 protocols come with unique characteristics like layer 1 blockchains, and it marks the difference between the two protocols. Nonetheless, services related to layer 2 protocols are linked to specific blockchain networks. For example, Bitcoin leverages the power of the Lightning Network whereas Ethereum is based on the Optimism protocol.
Layer 3 Protocol & Why should Bitcoin implement it?
The interaction between layer 1 and layer 2 solutions has made it mandatory to leverage the power of interoperability protocols on a separate third layer. A layer 3 in the blockchain is significant when it comes to addressing the differences between layer 1 and layer 2 blockchains. Layer 3 aims at resolving interoperability issues and streamlining the processes in the basic layers of blockchain technology.
Layer 3 is based on the absence of diverse factors, such as functionalities, technologies, and attributes to help users in various ecosystems. Thus, layer 3 enables various ecosystems as well as networks to interact, connect, and communicate with each other.
You already know that the layer 3 protocol type contributes to addressing interoperability issues. It shares similarities with internet protocol in terms of the work structure to make sure of proper transportation of data packets.
The layer 3 protocol solutions aim at evaluating the value of data packets and sending the value packets throughout various DLTs (Distributed Ledger Technology). In addition, layer 3 protocols can make sure of an effective connection between layer 2 and layer 1 chains. Every layer 3 protocol can also connect all the services and applications associated with layer 1 and layer 2 chains.
The Blockchain Trilemma & the Role of Layer 3 Protocol
Did you know what makes up the blockchain trilemma? The answer is decentralization, stability, and security. However, almost all blockchain projects need to exclude one of the above factors when it comes to achieving better performance than the rest. Solana and Ethereum are two of the common examples to witness the exclusion.
Whereas Bitcoin and Ethereum emphasize more on decentralization, Solana considers security and stability in most cases. Since scalability comes with a cumbersome problem when it comes to combining the layer 1 blockchain’s three elements, a multilayer structure can be the rescuer. It comes with an affordable yet efficient solution to ensure security, scalability, and decentralization.
Do you wonder about the significance of the layer 3 protocol in presence of layer 2 protocols? One of the key reasons for incorporating the multi-level architecture in the networks is to check the scalability issues. Although layer 2 blockchain solutions can help keep problems related to scalability at bay, layer 3 can help to ease the blockchain trilemma (which is impacting the participants of the crypto market).
On the other hand, layer 2 solutions are unable to address the issues related to interoperability. Did you know layer 2 protocols cannot provide any provision to view, access, or exchange information between diverse computer systems?
When it comes to the blockchain space, interoperability can also be comprehended as cross-chain functionality. That means two distinct blockchain networks can interact with each other and complete transactions between them without any centralized intermediary despite the difference in the ecosystems between the said blockchain networks.
For instance, it is next to impossible to relocate Bitcoin to the Ethereum blockchain and to leverage the power of Bitcoin throughout multiple DeFi applications. Note that almost every solution, which ensures the flexibility to trade crypto throughout various DeFi solutions and dApps, comes with the centralized control to some extent.
The layer 3 blockchain comes as a significant solution when it comes to well-known DeFi apps. Note that Serum (the decentralized exchange) and Aave (the lending protocol) are contributing to various blockchain networks. That means an individual cannot leverage the provisions on such platforms. That means the dearth of interoperability marks the importance of the implementation of layer 3 solutions.
Its hoped that you got insights into the layer 3 solutions in the domain of blockchain. Moreover, you have also got a clear idea of how layer 3 solutions can help improve the blockchain ecosystem.