Is it necessary for Layer3 to be strongly promoted by Arbitrum and zkSync as Layer2 becomes increasingly competitive?

Written by: flowie, ChainCatcher

Arbitrum and zkSync seem to be in sync. As Optimism rebranded to OP Mainnet, showcasing the ambition of a cross-chain empire, both Arbitrum and zkSync have picked up the weapon of Layer3, intending to carve out a multi-chain future.

First, the Arbitrum development team Offchain Labs announced the launch tool for the Layer3 blockchain Arbitrum Orbit. Soon after, the zkSync development team Matter Labs rapidly released the open-source toolkit ZK Stack, which supports not only the construction of Layer2 but also Layer3.

In a time when applications have yet to explode and Layer1 and Layer2 have become saturated, why are Arbitrum and zkSync rushing into Layer3? What problems does it solve? Is it necessary to recreate Layer3?

What is Layer 3? What problems does it solve?

Although Layer 3 is not a new term, it has remained a difficult and abstract concept without practical progress. The concept of Layer3 was first proposed by StarkWare. At the end of 2021, StarkWare published a blog post titled "Fractal Scaling: From L2 to L3," detailing their vision for Layer3.

So why is Layer3 needed? The fundamental reason lies in cost reduction and efficiency improvement, as well as the need for high customization. StarkWare believes that multiple Layer3s will be built on top of Layer2, just as multiple Layer2s are built on Layer1.

Specifically, Layer1 can only serve as a settlement layer to ensure security due to high costs, while Layer2 inherits the security of Layer1 to achieve cost reduction and scalability; thus, Layer 3, as a new independent layer built on Layer 2, continues to stack benefits, inheriting the security of Layer 1 and the performance and scalability of Layer 2. On one hand, it further reduces costs and improves efficiency; for example, StarkWare mentioned, "If the cost of each layer is reduced by 1000 times, then the cost of L3 can be reduced by 1,000,000 times compared to L1." On the other hand, and more importantly, Layer 3 can better achieve customization, controlling the tech stack to meet various needs and privacy.

Layered Ecosystem

In StarkWare's layered ecosystem diagram, we learn about some customized use cases of Layer 3 .

1. StarkNet with Validium data availability, for example, is commonly used in applications that are extremely sensitive to pricing.

2. Application-specific StarkNet systems customized for better application performance, for instance, achieved by adopting specified storage structures or data availability compression.

3. StarkEx systems (such as those serving dYdX, Sorare, Immutable, and DeversiFi) with Validium or Rollup data availability, immediately bringing proven scalability advantages to StarkNet.

4. Privacy StarkNet instances (also serving as L4 in this example) allow for privacy-preserving types of transactions to exist without including them in the public StarkNet.

In summary, compared to the general scalability of Layer 2, Layer 3 aims for customized scalability to improve performance and achieve low-cost scalability. Half a year later, at a time when Layer2 was almost at its most incentivized stage, Vitalik elaborated on StarkWare's Layer3 concept in a lengthy article. He provided further analysis of StarkWare's Layer3 stacking concept and raised some feasibility analyses.

Vitalik succinctly summarized StarkWare's Layer3 vision and acknowledged the rationality of these theoretical visions.

L2 is for scalability, L3 is for customized functionality, such as privacy. This vision can be understood as since Layer 2 has achieved scalability, can Layer 3 inherit the scalability of Layer 2 and then refine some customization needs that are difficult to achieve in Layer 2 ? Vitalik believes this concept does not attempt to provide "scalability squared," meaning it does not emphasize stacking scalability benefits but rather sees a layer in the stack that can help applications scale, along with an independent layer to meet the customized functional needs of different use cases.

L2 is for general scalability, L3 is for customizable scalability. How to understand customizable scalability? Some scalability designs in Layer2 are made for generality and compatibility, which actually sacrifices some performance. Can Layer3 abandon some generality and compatibility to achieve higher performance through customized circuit design?

L2 is for trustless scaling (rollups), L3 is for weak trust scaling (validiums). Weak trust scaling, while having a much lower security level than trustless scaling, can be much cheaper.

Of course, Vitalik also raised many questions about this architecture: Is a three-layer structure the right way to achieve these goals? What is the significance of anchoring verification, privacy systems, and customized environments to L2 rather than just anchoring them to L1? In other words, many of the privacy and other customized uses of Layer3 mentioned above, as well as the low-cost and performance needs, can essentially be achieved through a Layer2 network structure. Why is there a need to create a third layer to achieve this?

Vitalik believes one possible argument for the superiority of the three-layer model over the two-layer model is cost efficiency. "The three-layer model allows an entire sub-ecosystem to exist within a single rollup, enabling cross-domain operations within that ecosystem to occur very cheaply without going through expensive L1."

Recently, Scroll researcher Yicheng also conducted an in-depth discussion on L3. In his view, the future landscape of the Ethereum ecosystem is likely to consist of simple L1, scalable L2, and customized L3 solutions.

What is noteworthy now is that the concept of Layer3 is gradually being realized. Last October, zkSync was the first to announce the development of the Ethereum Layer3 network "Opportunity," aiming to further enhance the scalability of the zkSync blockchain infrastructure, with a testnet expected to launch in Q1 of this year. Shortly after, Arbitrum disclosed the L3 blockchain Arbitrum Orbit, which developers can directly deploy, just after the airdrop feast created by Arbitrum.

Recently, Arbitrum and zkSync seem to be in sync. As Optimism's rebranding to OP Mainnet reveals the ambition of a multi-chain empire, both Arbitrum and zkSync have picked up the weapon of Layer3, launching developer tools that support the development of Layer3 chains, intending to build a multi-chain future.

The Layer 3 Vision of Arbitrum and zkSync and the Multi-Chain Future

Before launching the Layer3 platform Arbitrum Orbit, Arbitrum had already established a diversified ecosystem composed of different technologies.

Arbitrum One, Nitro, etc., are Layer 2s based on Optimistic Rollup technology, typically suitable for DeFi projects. Arbitrum Nova is a Layer 2 using AnyTrust technology, which, while not as secure as Ethereum, offers greater scalability than those using Optimistic Rollup.

The existing Rollup and AnyTrust technology routes of Layer2 in Arbitrum can meet the general Ethereum expansion needs of most projects. But what is the purpose of launching the Layer3 platform Arbitrum Orbit? In short, they hope that Arbitrum Orbit will provide developers with more autonomy and flexibility, unlocking more highly customized needs.

From Arbitrum's description and architecture diagram, the Layer 3 of Arbitrum Orbit is generally consistent with StarkWare's Layer 3 concept. Arbitrum Orbit allows developers to build dedicated application chains based on Arbitrum Layer2 chains (One, Nova, Goerli), customizing features such as privacy, permissions, fee tokens, and governance. Additionally, the Orbit chain is not a completely isolated blockchain network; the chains within the Orbit will achieve interoperability, although the interoperability features are still under development and not yet available.

Compared to application chains, Arbitrum Orbit chains can serve as both application chains and open ecosystem chains, allowing developers to highly customize and have more flexibility and autonomy. Arbitrum believes that the scalability, autonomy, and flexibility of Arbitrum Orbit will help Ethereum move towards a multi-chain future.

Currently, a Layer 3 blockchain designed specifically for video games, Xai, is set to launch on Arbitrum later this year. The Ethereum scaling project AltLayer has also announced support for the Layer 3 blockchain Arbitrum Orbit. Recently, the derivatives trading platform Syndr announced the launch of a testnet based on Arbitrum Orbit, becoming the first DeFi protocol in the Arbitrum Orbit Chain ecosystem.

While Arbitrum Orbit focuses on Layer3, zkSync's open-source framework ZK Stack supports both Layer2 and Layer3, helping developers build custom ZK-driven Layer2 and Layer3 (referred to as Hyperchain).

The core of ZK Stack provides two key features: sovereignty and seamless connectivity. In terms of sovereignty, ZK Stack allows developers to modify code according to their needs, customizing chains without restrictions. Seamless connectivity emphasizes interoperability, with ZK Stack's Hyperbridges network facilitating interconnection between each hyperchain, achieving low-cost and high-efficiency interoperability, similar to Cosmos IBC.

zkSync also clearly states what needs ZK Stack is suitable for. It is more suitable for developers who need to customize chains (such as sorters) and can accept asynchronous connectivity of ecosystems (since it involves creating a new chain, not contract interactions on the same chain). ZK Stack adds that if one is simply developing a DeFi project, they can directly use its Layer2 protocol zkSync Era.

The main use cases of ZK Stack are in the following scenarios: building super scalability needs in games or social networks; low-latency needs in DeFi, privacy chain needs for banks or enterprises, and demands for interoperability and native tokens.

From practical use cases, ZK Stack and Arbitrum Orbit are quite similar, but compared to Arbitrum Orbit's emphasis on building Layer3 application chains, ZK Stack seems to emphasize achieving a multi-chain empire through inter-chain interoperability. According to crypto KOL @tmel's analysis, "The technical advantages of ZK Stack in Account Abstraction, asynchronous cross-chain calls, and infinite scalability provide possibilities for constructing a complex multi-chain network era."

Is it necessary to recreate Layer 3?

Many in the crypto community complain that this is an era where there are more chain launch tools than chains themselves. Under the various rollouts of OP Stack and Polygon 2.0, the rush to build Layer3 and multi-chain networks with ZK Stack and Arbitrum Orbit has also sparked some debate.

On one hand, Layer2 is not fully established yet; how much can we expect Layer3, built on Layer2, to be useful? If the crypto market has any memory, last year's Arbitrum airdrop was mocked due to RPC outages. zkSync has long been criticized for issues related to Zk Rollup compatibility and outages. Given that the zkSync ecosystem largely consists of low-quality projects, is the rush to build Layer3 somewhat counterproductive?

On the other hand, the high customization flexibility and autonomy of Layer3 itself is a double-edged sword. Crypto KOL @tmel0211 believes that while it can allow leading applications in gaming and social fields to gain momentum more quickly, it also permits developers to design advanced technical mechanisms such as gas fee tokens, which could increase the risk of project teams exploiting the system for profit.

Moreover, whether Layer3 allows developers to expand customized dedicated application chains based on the security foundation of their L1 and L2 will weaken the original ecological advantages of Layer2 and fail to capture more value remains a question mark.

Currently, besides Arbitrum and zkSync discussing Layer3 narratives, Lens Protocol has launched the L3 scaling solution Momoka, and Zebec has introduced its first Layer3 chain, Nautilus Chain.

According to Vitalik's speculation, a multi-layer network of Layer3, Layer4, and Layer5 is a rational trend. However, in a time when applications have yet to explode and Layer2 is not yet stable, is it necessary to push for Layer3?