Is Layer-3 the Future of Scalability?

As the blockchain ecosystem expands, so does the demand for versatile, customizable technology. Scalability is crucial for making technology more accessible to Web3 developers and consumers alike. If developers can create scalable applications, they can extend their reach to more users without significantly increasing costs or requiring additional resources. For those looking to initiate a chain with limited resources, layer-3 solutions offer a promising avenue.

By reducing overhead, operational, and onboarding costs, layer-3s are rapidly emerging as a vital component of the blockchain ecosystem, providing developers with enhanced flexibility and opportunities for growth.

When layer-3s first gained attention, they were initially met with scepticism. Critics argued that building on top of layer-2s could introduce additional complexity and unnecessary fragmentation, potentially making the app ecosystem harder to navigate and reducing interoperability.

However, as more use cases have been explored, the advantages of layer-3s have become more apparent. They are proving to be effective in lowering barriers to entry for new chains and reducing user onboarding costs, all with minimal compromises to security.

Layer-3 Accessibility 

Data availability costs are declining as blob sizes increase and alternative data availability layers emerge. Consequently, the primary cost of a chain is increasingly tied to submitting data commitments and state roots for withdrawals.

Operating a layer-3 chain incurs significantly lower fixed overhead costs than operating a layer-2 chain. The expense of submitting data commitments and output roots to a layer-2 chain is substantially less than submitting similar transactions to the Ethereum Mainnet.

Furthermore, depositing tokens for a new user on a newly launched layer-2 chain can be costly. It involves acquiring tokens on layer-1 and then transferring those tokens from layer-1 to layer-2, requiring two layer-1 transactions. During spikes in Ethereum Mainnet fees, these transactions can become prohibitively expensive for new users. Conversely, onboarding a new user on a layer-3 involves just two layer-2 transactions, drastically reducing costs.

This cost reduction provides application developers and chain operators new, more economical options for bootstrapping usage and onboarding users.

We are already witnessing this trend with Base, a chain that has generated significant demand and has broadened support for layer-3s built on top of it.

The entire blockchain ecosystem benefits from layer-2's commitment to supporting the growing layer-3 ecosystem, enabling more developers to harness the capabilities of layer-2 technology stacks.

What Problems Do Layer-3s Solve?

Demand for layer-3s is surging, and two features have rapidly emerged as the most requested. The first feature is custom gas tokens. These allow developers to utilize a layer-2 token as the native gas token for a layer-3, enhancing community development. If there is an established community around a layer-2 token, adopting it as the native token for gas payments is a logical step toward nurturing an ecosystem. Custom gas tokens can facilitate new use cases, such as in-game currencies for gaming ecosystem chains or token grants that subsidize fees for developers and users.

The second sought-after feature is alternative data availability or alt-DA. This feature allows developers to choose their preferred data availability layer, significantly reducing transaction costs while aiming to minimize security trade-offs.

Integrating layer-3 with alt-DA enables developers to maintain low overhead costs when posting to layer-2. This approach also ensures sustainably low data availability costs, cumulatively leading to the most cost-effective deployment of a layer-2 tech stack.

As layer-3s continue gaining traction, I anticipate many of these chains will launch featuring custom gas tokens and alt-DA.

What Lies Ahead?

Developers now have more options than ever, and choosing between deploying a layer-2 or layer-3 has become a "choose your own adventure" scenario. Each option has its unique advantages and challenges, but there is ample opportunity for all to thrive.

While deploying a standard configuration, layer-2s remain the most battle-tested and forward-compatible way to launch a chain. However, layer-3s offer increased accessibility for launching new chains at an ultra-low cost. Key features such as custom gas tokens and alternative data availability (alt-DA) are crucial for the growth and widespread adoption of layer-3s, playing a significant role in driving innovation and supporting a shared vision for scaling Web3.

Kevin Ho, a co-founder of Optimism and a product team member at OP Labs, is deeply involved in overseeing protocol development and contributing to the Optimism Collective. OP Labs is committed to accelerating the adoption of Ethereum by developing the most secure, decentralized, and open-source tech stack—the OP Stack. Additionally, OP Labs provides vital resources and support to the developer community that builds and deploys on the Superchain.