Layers Of Blockchain Demystified – Understanding L1, L2, and L3

Crypto is evolving fast and the curiosity to know what are Layers in blockchain too. What began with Layer 1 blockchains like Bitcoin and Ethereum has expanded into Layer 2 scaling solutions and now the early stages of Layer 3 networks. If you’re wondering how they differ and why they matter, this guide breaks it down simply.

What is Layer 1 (L1)?

Layer 1 blockchains are the base networks. They handle transactions, consensus, and security directly on their main chain.

Examples: Bitcoin, Ethereum, Solana, Avalanche.

Strengths:

• Decentralized and secure.
• Native token (ETH, BTC, SOL) used for fees and staking.
• Large ecosystems and liquidity.

Weaknesses:

• Scalability limits — high fees and slower transactions under heavy load.

What is Layer 2 (L2)?

Layer 2s are built on top of Layer 1 to solve scalability issues. They process transactions off-chain (or in bundles) and then settle back to the main chain for security.

Examples: Arbitrum, Optimism, zkSync, Polygon PoS (hybrid).

Strengths:

• Faster and cheaper transactions.
• Inherits L1 security.
• Expanding ecosystem of dApps.

Weaknesses:

• Added complexity (bridges, rollups).
• Security risks if L2 is not well-designed.

What is Layer 3 (L3)?

Layer 3s are a new concept — specialized blockchains or networks built on top of Layer 2. Their goal is application-specific scaling.

Think of them as custom blockchains for particular use cases like gaming, DeFi, or social apps, running on top of an L2 rollup.

Examples (early stage): Starknet Appchains, Orbs L3, dYdX’s evolution.

Strengths:

• Tailored for specific industries (faster gaming chains, privacy-first apps).
• More modular design for Web3 apps.
• Offloads congestion from general-purpose L2s.

Weaknesses:

• Still experimental.
• Added layers may reduce composability (apps working seamlessly together).

Layer 1 vs Layer 2 vs Layer 3: Key Differences

Why This Matters

• Layer 1s will always be the foundation.
• Layer 2s are solving Ethereum’s congestion and making crypto usable.
• Layer 3s could bring in the next wave of Web3 applications with custom blockchains for every niche.

The future is likely a multi-layered ecosystem, where users may not even realize which layer they’re on — they’ll just enjoy faster, cheaper, and smoother experiences.