Blockchain

Layers

L0

Ex. Polkadot, Cardano, Cosmos, Avalanche

The layer of the Internet, hardware, and connections exist, which allow L1-s like Bitcoin to run.

1. Allow blockchains to interact with each other. Ex. Cosmos, an ecosystem of interoperable blockchains using Tendermint IBC (Inter-blockchain communication protocol). Dapp can work on different blockchains at the same time if they are built on the same L0.
2. Faster and cheaper transactions on cross-chain exchanges. Consensus can be achieved across multiple chains resulting in short finality times (finality = when a block is approved, can’t be rolled back, and is considered irreversible).
3. Infrastructure for developers to deploy blockchains using many pre-built features.

L1

Ex. Bitcoin, Ethereum

Blockchains that process and finalize transactions on their own. Consensus (PoW or PoS), block time and dispute resolution take place at this level. Blockchains exhibit the trilemma decentralization, security, and scalability, meaning that it is hard to optimize all 3 at the same time.

L2

E., Polygon

Third-party integrations used in conjunction with L1s (zero-knowledge rollups and side chains) to increase scalability and reduce transaction time (system throughput).

L3

Ex. Uniswap, MAKER, Decentraland

Layer 3 is the application layer, UI that users interact with.