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Layer-3s are the future of scalability

source-logo  blockworks.co 18 May 2024 15:00, UTC

As the blockchain ecosystem grows, so does the demand for flexible, customizable tech.

Scalability is about making technology more accessible to Web3 builders and consumers. If developers can build scalable applications, they can reach more users without increasing their costs significantly or needing to multiply their resources. For those wishing to bootstrap a chain with limited resources, layer-3s could serve as a promising opportunity.

By cutting down on overhead operational and onboarding costs, layer-3s are quickly becoming an important piece of the blockchain ecosystem to give developers greater flexibility and growth opportunities.

When layer-3s started trending, they were met with initial skepticism. Building on top of a layer-2 could add complexity and unnecessary fragmentation, and adding more layers could make the ecosystem of apps more challenging to navigate, leading to a lack of interoperability.

But as more use cases emerge, the clearer it becomes: Layer-3s can lower barriers to entry for new chains and lower onboarding costs for users with minimal security tradeoffs.

The accessibility of layer-3s

Data availability costs continue to drop with increases in blob size and alternative data availability layers. The cost to operate a chain then increasingly becomes the cost to submit data commitments and state roots for withdrawals.

The fixed overhead cost to operate a layer-3 is thus significantly less than the fixed overhead cost to operate a layer-2. Submitting data commitments and output roots to a layer-2 is significantly less expensive than the cost to submit those same transactions to Ethereum Mainnet.

Additionally, when a layer-2 chain is newly launched, depositing tokens into that chain as a new user can be expensive. It requires both acquiring tokens on the layer-1 and then depositing those tokens from layer-1 to layer-2 — a total of two layer-1 transactions. During Ethereum Mainnet fee spikes, we’ve seen these transactions get prohibitively expensive for new users. With a layer-3, onboarding for a new user will only be two layer-2 transactions, which is a small fraction of the cost.

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This presents application developers and chain operators with new, more cost-effective options to bootstrap usage and onboard new users.

We’re already seeing this trend with Base as an example; the chain has driven outsized demand and has expanded support for layer-3s building on top of it.

The entire blockchain ecosystem can benefit from layer-2’s commitment to the burgeoning layer-3 ecosystem, with even more developers able to leverage the power of layer-2 tech stacks.

Key features fueling the rise of layer-3s

From my vantage point, demand for layer-3s is surging and two features have quickly become the most highly requested.

The first is custom gas tokens, which allow developers to use a layer-2 token as the native gas token for a layer-3. Custom gas tokens are great for community development — if there’s an existing community rallied around a layer-2 token, using it as the native token to pay for gas is a concrete next step towards building an ecosystem. Custom gas tokens can enable new use cases like in-game currencies for gaming ecosystem chains and token grants which directly subsidize developer and user fees

The second sought-after feature is alternative data availability, or alt-DA. This gives developers the option to select the DA layer of their choosing, greatly reducing transaction costs with the goal of minimizing security tradeoffs.

Combining a layer-3 with alt-DA can give developers low overhead costs to post to the layer-2. This is in addition to sustainably low data availability costs, all adding up to the cheapest possible deployment of a layer-2 tech stack.

As layer-3s gain momentum, I expect many of these chains to launch with both custom gas tokens and alt-DA.

Powering the layer-3 future

Developers have more options than ever before, and it’s “choose your own adventure” when it comes to deploying a layer-2 or layer-3. All have their pros and cons, and there’s room for all to succeed.

While deploying a standard configuration, layer-2s will always be the most battle-tested, forward compatible way to launch a chain. However, layer-3s increase the accessibility of launching a new chain with ultra low cost. I see key features like custom gas tokens and alt-DA as important to the growth and adoption of layer-3s, which are in turn important for driving innovation forward with a shared vision for scaling Web3.

Kevin Ho is a co-founder of Optimism and a member of the product team at OP Labs, where he oversees protocol development and contributes to the Optimism Collective. OP Labs’ mission is to accelerate adoption of Ethereum with the most secure, decentralized open source tech stack, the OP Stack. OP Labs also provides resources and support to the developer community building and deploying on the Superchain.