With L1 and L2 projects clustering, what L3 projects are worth your attention?
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With L1 and L2 projects clustering, what L3 projects are worth your attention?
Although the expansion roadmap continues to move forward, highly customizable Layer 3 appears to be the logical next step.
Navigating Web3 tides with focused insightsAuthor: 0XSTRUBE
Compiled by: TechFlow
Over the past few years, Ethereum has made significant progress on its roadmap, completing the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS), known as "The Merge." More recently, the Dencun upgrade introduced proto-danksharding, making Layer 2 transactions significantly cheaper.
(Source: growthepie)
Before Dencun, transaction fees on Layer 2 were around $0.50; now, most Layer 2 chains charge only one or two cents per transaction. This shift has greatly facilitated the expansion of new applications on Ethereum.
(Source: Artemis)
Since the Dencun upgrade, daily transaction volumes on Arbitrum and Base have surpassed those of the Ethereum mainnet—and this trend continues. While much work remains for Ethereum’s scalability, this marks an important step forward, with infrastructure significantly improved since the last cycle. The recent surge in activity and transaction volume on Arbitrum and Base may just be the tip of the iceberg for what's coming in this cycle.
Layer 3 Scaling
The original versions of Ethereum rollups were Optimism and Arbitrum, both optimistic rollups. Today, there is a growing number of Layer 2 optimistic and zero-knowledge rollups, most categorized as general-purpose. An application chooses which rollup to operate or build on based on its required feature set and security needs. For example, apps like Uniswap can run on general-purpose Layer 2s such as Arbitrum One. However, if you're building a crypto gaming or NFT project—or any application requiring higher throughput or ultra-low fees (e.g., $0.0001)—you might need a different solution. This is where Layer 3 comes into play.
Examples of Layer 3 frameworks include Arbitrum Orbit and zkSync Hyperchains. While Layer 3 is still in early stages, further changes and improvements are expected in the future. The core idea behind Layer 3 is to extend Ethereum’s scalability by creating highly customizable, cheap, fast, and interoperable chains, offering varying degrees of security and decentralization.
Degen Chain (DEGEN)
Degen Chain is an emerging innovative blockchain launched in January 2024 that quickly gained attention, reaching a fully diluted valuation (FDV) exceeding $2 billion within three months of launch.
Degen Chain was initially launched within the Degen channel on Farcaster, a new social app allowing users to tip for high-quality content.
Built using Arbitrum Orbit, settling to Base, and leveraging AnyTrust for data availability (DA), the chain experienced a surge in total value locked (TVL) during its initial hype phase, which later stabilized along with the price of DEGEN.
Sanko (DMT)
Another interesting Layer 3 use case is Sanko, another chain built using Arbitrum Orbit, settling to Arbitrum L2 and using AnyTrust for data availability. Sanko primarily focuses on NFTs and gaming, leveraging the low cost and high throughput offered by Layer 3. Its native token DMT performed strongly in 2024.
Dream Machine is a notable application on the Sanko L3, and Sanko itself functions as a hybrid platform combining social features and gaming. Sanko.TV blends gaming with streaming entertainment, allowing users to purchase passes for their favorite streamers and gain access to private chat rooms—similar in operation to Friend.tech.
Sanko demonstrates the customizability of Layer 3 chains and highlights their potential. The rise in DMT’s price reflects sustained interest in what Sanko is building, and its innovative fusion of gaming and social elements presents a compelling value proposition. As social applications begin gaining momentum, Sanko is undoubtedly a project to watch.
The Future of Layer 3
Layer 2 mainnets have been live for several years and have made substantial progress in scaling Ethereum. While the scaling roadmap continues to evolve, Layer 3s with high customizability appear to be the logical next step. Numerous projects are already experimenting on Layer 3 with varying levels of progress.
However, an interesting use case or short-lived hype does not necessarily equate to a good investment. In both examples discussed (DEGEN and DMT), the native tokens have experienced significant volatility, and these chains are far from proven. Yet, with Layer 2 now scaled and transaction fees reduced to mere cents, opportunities and use cases have expanded dramatically. It’s crucial to track trends in application types enabled by increased throughput and customizability—Layer 3 will undoubtedly bring some exciting investment opportunities.
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