Addressing Crypto Twitter’s Debate About Layer 3s: What Are Layer 3s & Why Are They Needed?
Over the past two weeks, a fiery debate has emerged on “Crypto Twitter’’ (CT) regarding the concept of Layer 3s (L3s). This debate has garnered attention from the likes of Messari, Vitalik Buterin himself, the Bankless podcast, Layer 2s including Base and Arbitrum, and Layer 1s such as Solana. These various stakeholders and commentators have posed many insightful questions and arguments for and against L3s. The recent popularity of L3 is occurring largely due to ongoing debates regarding improving the blockchain’s functionality, addressing Ethereum scalability and Layer 2 Rollups, and assessing whether alt-Layer 1s such as Solana can provide the solutions that Ethereum Layer 2s and Layer 3s seek to provide.
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We at zkLink have already put forward our Layer 3 thesis and deployed a Layer 3 product, zkLink Nova, and a Layer 3 settlement technology, zkLink Nexus, which symbolizes our early recognition of the value proposition that Layer 3s hold, and how best to deploy them in a way that solves the potent issues plaguing the blockchain industry today that are hampering user adoption.
However, the market and general public are still unfamiliar with the Layer 3 concept — and as a result, have their fair share of both skepticism and optimism.
Therefore, to calm the storm that has emerged around L3s — in this article, we’ll clarify what Layer 3s are and define how they work, address the diverse comments from the general public about Layer 3s, and finally, show how zkLink’s Layer 3 thesis and products solve the issues being debated as well as the issues users and developers currently face when navigating the blockchain landscape.
What Is A Layer 3?
Layer 3s are commonly defined as a third blockchain layer built on top of Ethereum Layer 2 Rollups that deliver higher scalability, lower gas costs, and greater customizability. For us at zkLink, a Layer 3 is also a third layer constructed on top of Ethereum Layer 2s that 1) aggregates fragmented assets from siloed Ethereum Layer 2s, and 2) provides developers and users with a more friendly blockchain environment for deploying EVM-compatible DApps while avoiding the complexities of cross-chain bridging.
More info about Layer 3s can be read in our blog article, “Mapping The Layer 3 Ecosystem: Who’s Pushing The Industry Forward?”
When Did The Concept Of Layer 3s Emerge?
Layer 3s are not a new “thing” — in fact, many projects have been working on and hinting at Layer 3 solutions for years. For example, StarkWare, back in December 2021, published a Medium article titled, “Fractal Scaling: From L2 to L3,” which outlined their thesis for future Layer 3 development.
Then, in September 2022, Vitalik Buterin published a personal blog article titled, “What kind of layer 3s make sense?” But most importantly, Layer 3s are already well beyond proposal and ideation, and have entered the early adopter phase with multiple products deployed on the market. These include zkLink Nova, Arbitrum Orbit, zkSync hyperchains, and the recently hyped Degen Chain.
Background To The Recent Debate Surrounding Layer 3s
Initially, in late March, Layer 3s started to gain traction when prominent crypto analysts such as Mason Nystrom sent out a series of tweets hypothesizing the use cases, along with the advantages and disadvantages of Layer 3s.
During this time, the focus was primarily centered on why apps would want to launch their own L3 blockchain. This theorizing is quite timely given the current market trends and circumstances post-Dencun, where the next step for Ethereum and the future of Ethereum scalability via L2s is very much undetermined — as there are no perfect solutions on the market that address the very fundamental issues related to blockchain development and usability such as scalability, customizability, composability, interoperability, and complexity.
Then, in the following days, bigger names such as:
- Mert Mumtaz (100K followers) — CEO of Helius Labs
- Ian Lee (25K followers) — Co-founder of Syndicate
- Mustafa Al-Bassam (40K followers) — Co-founder of Celestia
- Cygaar (80K followers) — Frame.XYZ and Mocaverse Advisor
- Steven Goldfeder (26K followers) — Co-founder of Offchain Labs
- Hayden Adams (270K followers) — CEO of Uniswap
…began commenting on the topic, replying to each other’s tweets, and sending out their own L3-related posts. However, this boiling debate didn’t receive massive public attention until April 1st, when Polygon Labs CEO Marc Boiron published a tweet saying:
“L3s exist only to take value away from Ethereum and onto the L2s on which the L3s are built,” adding that, “You don’t need L3s to scale.”
This was the tweet and public declaration that sparked a series of supporting and counterarguments to Marc’s viewpoints. Vitalik Buterin even re-entered the arena with his tweet on the matter.
So putting everything together, where do we stand? Both Marc and Vitalik focus on Layer 3s from the scalability perspective, whereas Mason went beyond scalability and addressed other aspects such as being able to utilize one’s native token in a more economically efficient manner and having more customizability and freedom to explore unique business models. However, Mason is also primarily talking about appchains and superchains, from Arbitrum and the OP Stack, respectively — which are still limited to their ecosystems and thus significantly different from Layer 3s such as zkLink Nova or DApps built upon the zkLink Nexus solution.
In particular, zkLink’s Layer 3 solutions provide developers and users with access to aggregated liquidity from multiple Ethereum Layer 2 Rollups — whether on a general-purpose Layer 3 or an application-specific Layer 3 scaling engine, depending on the use case and business model of the developer. This means zkLink has more diverse product offerings than its peers but is also similar in the way it provides enhanced scalability with zero-knowledge proofs, and Ethereum-equivalent security through a multi-chain state synchronization process.
Going back and elaborating further on Marc’s perspective on why it’s not accurate to say “Layer 3s take value away from Ethereum.’’ This is because Layer 3s and the underlying Layer 2 Rollups are built on top of Ethereum, and subsequently utilize Ethereum’s security properties and reliability to check the consistency of sync hashes with on-chain transactions.
On Marc’s second point, “You do not need L3s to scale,” this statement is a half-truth. While yes, Layer 2s have sufficiently scaled Ethereum, providing users with low-cost transactions and DApps to use at affordable levels — many Layer 2s are still only for general-purpose use cases, which may limit DApps that want added scalability, greater sovereignty, customizability, or require an application-specific high-performance environment for certain financial use cases such as CLOB and AMM DEXs. Under these scenarios, Layer 3s can provide sufficient scalability and customizability.
Moreover, it’s important to note that zkLink Nova’s general-purpose Layer 3 can also provide for increased scalability, with its modular architecture using external DA solutions. Therefore, Layer 3s do in fact scale to a degree beyond Layer 2s, which will be experienced by the end user as transaction costs keep decreasing by the cents and dollars.
Diving Deeper Into The Different L3 Viewpoints: Pessimists vs Optimists
L3 Pessimists: Bearish/Negative/Skeptical
- Mert (100K followers) — CEO of Helius Labs
Besides Marc Boiron from Polygon, Mert, a Solana-ecosystem expert, was arguably the most outspoken “L3 Pessimist” on Twitter. Mert’s criticisms centered largely around the notion that industry voices have already started moving towards Layer 3s before Layer 2s have fully developed. This comment (featured below) was made half sarcastically, essentially “talking up” Solana’s ability to “work” compared to Ethereum Layer 2s — which, in recent days, has come back to bite as Solana suddenly stopped processing transactions.
However, Mert does have a point in that many Layer 2s are in their developing stages and are still improving their technology, upgrading their functionality, and employing different modular approaches in their network designs. Nevertheless, in general, Layer 2s have proven to work quite well, and have received significant market value appreciation due to their ability to offer users access to Web3 DApps at a fraction of Ethereum’s cost. The data speaks for itself.
Mert’s second comment (featured below) explicitly criticizes the centralization/decentralization aspect of L2s and L3s in comparison to Solana. Underneath the surface, Mert is critiquing the modular stack of various L2s that offload certain components of the blockchain and transaction cycle to centralized sequencers, or to off-chain Validium DA providers.
While Mert brings up valid points, he fails to realize Layer 3s such as zkLink Nova can decentralize all of these aspects of the modular stack, such as the sequencing and DA layer.
In particular, zkLink Nova aims to incorporate decentralized sequencer solutions such as Espresso, Astria, and Fairblock, which will mitigate centralization risks by processing and validating transactions across a distributed network of nodes. This strategy will not only boost network security and transparency but also strive to offer a more secure, fair, and efficient solution to its users.
In addition, very shortly, zkLink Nova will integrate with external DA solutions such as Celestia, EigenDA, and Avail, so that data will be stored in a more decentralized approach with censorship resistance. Therefore, Layer 3s like zkLink Nova can amply satisfy the decentralization requirements of both DApp developers and users that Mert is primarily concerned about.
- Cygaar (80K followers) — Frame.XYZ/MocaverseNFT
Cygaar, an industry ‘big brainer’ whose analysis below was retweeted by Marc Boiron, also raised similar concerns as both Marc and Mert, primarily regarding the development of L3s before fully maturing the L2 ecosystem, as well as issues concerning the centralization of L2s and L3s, in particular, at the sequencing layer. Cygaar also added a new critique of the bridge contract employed by L2s being upgradeable, which according to him, could allow assets to be stolen from the user. In Cygaar’s eyes, L3s and L2s are the same, evening going so far as saying “an L3 is not real,” adding that, “it’s really just an L2 on top of an L2.”
Regarding Cygaar’s point on centralization, at the moment, L3s are relatively centralized — however, because the segment is so new, the pathway to vastly improved decentralization is only a short time away from being realized. This will happen as more developers explore with L3s and customize them to meet their needs, which may include decentralized sequencers and DA providers.
Essentially, it’s the first game of the NBA Finals and Cygaar is already calling the series over. History tells us what happens when we approach blockchain innovation from this point of view. This is why Layer 3s will emerge as a “dark horse” narrative and value proposition propelling Ethereum adoption to new heights in the coming months and well into the next growth cycle.
L3 Optimists: Bullish/Positive/Neutral
- Ian (25K followers) — Co-founder of Syndicate
Ian, Co-founder of Syndicate, the team behind Degen Chain, provided counter remarks to the above “Pessimists,” primarily focusing on Layer 3s as a business model innovation, citing examples of the advantages of having a customizable gas token and being able to fine-tune a L3 blockchain rollup for a specific community, DApp, or game.
On top of that, interestingly, data already shows that when an individual airdropped DEGEN to 500 wallets, it took only 0.147 seconds to confirm the transactions at a total cost of $0.00089. So while many “Pessimists” claim L3s cannot provide for enhanced scalability and performance compared to Layer 2s or Solana, this data point serves as an opposing reference and early indicator for perhaps what can be achievable on Layer 3s.
- Mustafa Al-Bassam (40K followers) — Co-founder of Celestia
Mustafa Al-Bassam, Co-founder of Celestia, one of the world’s most innovative protocols within the modular stack offering enhanced DA solutions to the Ethereum ecosystem, compared L3s to how Internet service providers work. Mustafa’s primary concern is the UX of moving assets across L3s.
However, zkLink Nova has provided a solution to the UX problem by building an “Aggregated Layer 3” that aggregates assets from siloed Ethereum Layer 2s onto one unified platform and gives developers access to an EVM-compatible framework to deploy Ethereum ecosystem DApps. This gives developers access to additional liquidity when compared to deploying on a single Layer 2 and provides users with the convenience of being able to access their favorite DApps on zkLink’s integrated platform without having to utilize third-party bridges or moving between networks to access specific DApps or services.
- Steven Goldfeder (26K followers) — Co-founder of Offchain Labs
Steven Goldfeder, Co-founder of Offchain Labs, affiliated with Arbitrum, joined the debate with some interesting points regarding the advantages of L3s. Steven mainly noted the cost reductions of onboarding to an L3 by saving transaction costs on the L1, highlighting the smoother UX of navigating to an L3 from an L2.
In addition, Steven posed an argument contrary to Mert and the “Pessimists” concerns of L2s taking value away from Ethereum and not inheriting the security characteristics of Ethereum. Steven settles this debate by saying that despite L3s posting data to the L2, which saves on cost, it does not compromise security because the L2 will then post the transactions to Ethereum for verification.
- Hayden (270K followers) — CEO of Uniswap
Lastly, Hayden Adams, CEO of Uniswap, also took a shot at the “Pessimists” critiquing what seems to be a strict opposition to and conviction against other forms of scaling beyond Solana.
Hayden’s point hits to what Layer 3s are experimenting with and trying to achieve: exploring new forms of Ethereum scaling, creating new value propositions and functionalities within the Ethereum ecosystem, seeking to aggregate assets from siloed L2 Rollups, lowering costs for users, eliminating pain points such as bridging, and providing developers with a new environment, both EVM and VM, to experiment with more unique business models and sovereign rollups.
Verdict: Where Do Layer 3s Stand According To The Experts?
Based on the above experts and their viewpoints towards L3s — L3s can be summarized as still being early in their metaphorically speaking, “professional sports careers.” However, Layer 3s possess significant potential to go beyond Ethereum, Ethereum Layer 2s, and even alt-Layer 1s like Solana in their ability to function, provide scalability, and offer users and developers new products and services and deployment environments with aggregated liquidity.
Ethereum’s roadmap and endgame are still under development, morphing as various industry developments shape the market in different ways. However, it’s already apparent that added scalability and aggregation solutions are necessary to facilitate mass blockchain adoption. In this regard, Layer 3s are exactly the right fit.
Interestingly, Mason Nystrom surveyed whether more Layer 3s will come to the market, with the majority of voters believing more L3s will come to the market. Especially with the success of Degen Chain in gaining popularity, more mature Layer 3s like zkLink Nova, which has more offerings and functionality than Degen’s Layer 3, are poised for considerable growth in both its user base and the ecosystem of DApps. zkLink Nova’s L3 goes beyond the limits of L2s and L1s in being able to aggregate fragmented liquidity, facilitate seamless DApp deployment, and provide for enhanced scalability and security via zero-knowledge proofs, multi-chain state synchronization, and a customizable modular architecture.
L3 Spring and Summer are coming. Ethereum > Ethereum Layer 2 Rollups > Aggregated Layer 3s
zkLink looks forward to contributing to the greater L3 debate and invites those looking to join this conversation to attend and register for our real-life event on the topic, the L3 Summit, which is the industry’s leading technical forum for exploring Layer 3 blockchain solutions.
