Author: 0X STRUBE
Translated by DeepTide TechFlow
In recent 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”. Most recently, the “Dencun” upgrade has been implemented, including proto-danksharding, making Layer 2 transactions significantly cheaper.
(Source: growthepie)
Before Dencun, transaction fees on Layer 2 were around $0.50, whereas now, most Layer 2 chains charge only a few cents per transaction. This change 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 on the Ethereum mainnet, a trend that continues unabated. While Ethereum’s scalability still requires further development, this marks a crucial step in the right direction, with infrastructure significantly improved since the previous cycle. Activity and transaction volumes on Arbitrum and Base chains have increased in recent months, likely just the tip of the iceberg for what this cycle may bring.
Layer 3 Expansion
The initial versions of Ethereum rollups were Optimism and Arbitrum, both optimistic rollups. Currently, there are increasing numbers of Layer 2 optimistic and zero-knowledge rollups, mostly classified as general-purpose. The choice of which rollup to operate or build on depends on the required feature set and security needs. For instance, applications like Uniswap can run on a general-purpose Layer 2 (such as Arbitrum One). However, if you’re developing a crypto game or NFT project, or need higher throughput or extremely low transaction fees (like $0.0001), you may require 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 its early stages, changes and improvements can be expected in the future. The overall idea behind Layer 3 is to further expand Ethereum by creating highly customizable, inexpensive, fast, and interoperable chains, with varying degrees of security and decentralization.
Degen Chain (DEGEN)
Degen Chain is an innovative emerging blockchain launched in January 2024, quickly gaining attention with a fully diluted valuation (FDV) exceeding $2 billion within three months of its launch.
Degen Chain initially debuted on Farcaster’s Degen channel, a new social app allowing users to “tip” quality content.
Degen is built on Arbitrum Orbit, settles on Base, and uses AnyTrust for data availability (DA). The initial hype around the chain led to a surge in Total Value Locked (TVL), followed by stabilization, and subsequent adjustments in the price of DEGEN.
Sanko (DMT)
Another intriguing Layer 3 application is
Sanko
, built on Arbitrum Orbit and settling on Arbitrum L2, utilizing AnyTrust for data availability. Sanko focuses primarily on NFTs and gaming, leveraging Layer 3’s low cost and high throughput. Sanko’s native token, DMT, has shown strong performance in 2024.
Dream Machine is an interesting application of Sanko L3, combining social and gaming aspects on a single platform.
Sanko.TV
integrates gaming and streaming entertainment, allowing users to purchase passes for their favorite streamers and gain access to private chat rooms, akin to Friend.tech’s operations.
Sanko demonstrates the customizability of Layer 3 chains, showcasing its potential. The rise in DMT price underscores sustained interest in Sanko’s content, with its innovative blend of gaming and social features presenting a compelling value proposition. As social apps gain momentum, Sanko undoubtedly stands out as a project worth watching.
Future of Layer 3
Layer 2 mainnets have been operational for several years, making significant strides in scaling Ethereum. While the scalability roadmap continues to evolve, Layer 3, with its high customizability, seems like the logical next step. Numerous projects are currently experimenting on Layer 3 with varying degrees of progress.
However, an interesting use case and a brief surge do not necessarily translate into a good investment. In the cases we’ve discussed (DEGEN and DMT), native tokens have experienced significant volatility, and these chains are far from proven. Nevertheless, with Layer 2 now expanded and transaction costs reduced to just a few cents, opportunities and use cases have expanded dramatically. It’s crucial to monitor trends in application types driven by increased throughput and customizability; Layer 3 undoubtedly promises intriguing investment opportunities
