The data on April 1st shows that in the past 24 hours alone, there have been over 27,200 independent transactions on the L3 chain Degen Chain, which has only been online for four days, with a transaction volume close to 100 million US dollars and a highest intraday price exceeding 0.06 US dollars. DEGEN has surged more than 40 times in the past half month. The market value of the Degen project has also surpassed 1 billion US dollars in just three months, and its platform Farcaster is breaking user activity records, demonstrating its rapid growth momentum, and the market is also releasing increasingly excited signals for L3 networks such as DEGEN Chain.

However, while the market is excited about L3 networks, this phenomenon has also sparked continuous community controversy. Marc Boiron, CEO of PolygonLabs, expressed his dissatisfaction with the third layer (L3) networks, stating that their existence is taking away the value of Ethereum. This viewpoint has also been endorsed by Mert Mumtaz, CEO of HelusLabs, who believes that categorizing L3 as essentially centralized servers and positioning them as other centralized servers (L2) controlled by multisigs.

With the popularity and growing influence of Degen Chain, the narrative of Layer 3 networks has gained enough attention on the stage. This article will focus on Layer 3 networks, from basic concept popularization to DEGEN's successful analysis, and share several excellent well-known Layer 3 projects, to jointly explore this blue ocean full of opportunities.

Development History of Blockchain Network Solutions

Before understanding Layer 3 networks, it is very important to understand the first and second layer blockchains.

The first layer refers to the foundational layer of the blockchain network. Some common examples of Layer 1 include the Bitcoin chain, BSC chain, and Ethereum chain. The first layer blockchain network provides the basic infrastructure for developing dApps, allowing developers to create layers for transaction settlement and verification for smart contracts, dApps, and other blockchain layers. Another important highlight of Layer 1 blockchain is that they do not depend on any other network. As projects on Layer 1 continue to emerge rapidly, the network cannot handle the increasing execution and computation brought by the rapid development of the ecosystem. This has led to the emergence of Layer 2, which claims to reduce fees and expand capacity.

The second layer network is a key part of the development of the blockchain and Web3 landscape. Some common examples of Layer 2 include Arbitrum, Optimism, Polygon, etc. The basic optimization logic of Layer 2 is to separate and layer the functions of the public chain, leaving the consensus mechanism that provides security at Layer 1, and pushing computation and execution down to Layer 2, making the public chain the settlement layer of Layer 2, which is easier to implement and operate compared to mechanisms such as cross-chain and sharding. While maintaining a decentralized model, Layer 2 maximizes operational efficiency, but it still lacks in highly customized application scenarios and interoperability between protocols, which is the opportunity for the emergence of Layer 3.

The third layer expansion solution is the next upgrade after Layer 2, and when discussing the practical application of Layer 3, Ethereum founder Vitalik summarized it as: "L2 is used for scaling, L3 is used for customizable scaling, which precisely matches the special scenarios of user usage and developer preferences. At the same time, L3 has weak trust expansion characteristics, leaving data availability to trusted third parties or committees, further ensuring user privacy and usage security." In addition, Layer 2 solutions cannot promote communication between different protocols. Users seeking interoperable protocols and cross-chain dApps can seamlessly move within the entire decentralized service environment. The application scenarios of Layer 3 solutions are clear, and the demand has become urgent.

The Rise of the L3 Chain DEGEN

Degen was launched on the Degen channel on Farcaster in January 2024, distributing tokens between builders, content creators, and users. It reshaped the Farcaster ecosystem, allowing Casters to use DEGEN tokens to reward high-quality content creators. As of April 1st, DEGEN tokens have over 83,000 holders, with over 553,000 transactions, and are still growing rapidly.

DEGENChain is a customized L3 for the Degen community, allowing new attempts in rewards, community incentives, payments, games, and more. Its behind-the-scenes team is Syndicate, who have collaborated with multiple suppliers such as Conduit, Decent, and Airstack to improve convolution, bridging, and data APIs. It is an L3 built using ArbitrumOrbit, settled using Base, and providing data availability using ArbitrumAnyTrust, ensuring low cost and scalability. This effort marks an important step for EVM-compatible third-layer solutions, aiming to expand the scope of community rewards, tips, and payments. It is worth mentioning that the uniqueness of DEGENChain lies in the fact that the DEGEN token is also the native Gas token of the chain, making it a pioneer among community tokens with its own L3.

Rising unique factors:

1. Innovative airdrop and reward mechanism: DEGENChain introduces a unique airdrop gameplay, distributing rewards based on user activity and participation, which incentivizes users to create and share high-quality content, while also promoting the circulation and value growth of DEGEN tokens. Since January, Degen has rapidly gained popularity in the Farcaster community through high-quality reward activities, where community members can reward their favorite high-quality content in the form of comment count + DEGEN. The airdrop quota is based on the total amount received from others' rewards, so users need to post good content on Farcaster to receive rewards, and many active users' daily reward quotas even reach thousands of US dollars.

2. Community-driven development: DEGENChain originated from the Farcaster community, and the active participation of this community has provided a solid foundation for DEGENChain. Community members use DEGEN tokens to reward high-quality content creators, greatly enhancing the cohesion and activity of the community.

3. Diversified application scenarios: DEGENChain is not limited to a single application, but through cooperation with multiple projects and DApps, such as Drakula, DegenCast, etc., it has expanded the application scenarios of its tokens. This diversified strategy allows DEGEN tokens to have a place in different platforms and applications, increasing their practicality and appeal.

The decentralized TikTok on the Base chain, Dracula, was launched on March 14th, and the app uses DEGEN tokens as tokens. Users can use DEGEN tokens to purchase their favorite bloggers, adding scenarios and value to the application of DEGEN tokens.

4. Angel round financing brings financial support: In February, Degen announced the completion of a 490.5 ETH (approximately 1.47 million US dollars) angel round financing, which will be used for the development of the Degen ecosystem and community. Some shares were given to community projects such as Drakula, laying the groundwork for Degen's utility.

5. Unique market positioning: DEGEN Chain is positioned as a paradise for meme coins and experimental projects, which sets it apart in the cryptocurrency field. It not only provides a testing ground for emerging projects, but also offers high-risk, high-return investment opportunities for investors.

DEGEN Chain Ecosystem:

DEGENChain has quickly emerged as a vibrant and rapidly expanding platform within the Farcaster ecosystem, with its community-first approach and innovative third-layer blockchain technology. In just the first week of its launch, developers have introduced multiple applications on DEGENChain, with the most notable ones being:

• DegenSwap: DegenSwap is the primary decentralized exchange on DEGENChain, providing convenience for the trading and exchange of various cryptocurrencies, playing a crucial role in the ecosystem's liquidity and user participation.

• Memecoins: The popularity of various memecoins such as $CET, $DINU, $PURP has soared. These tokens have not only attracted attention but also encouraged more users to bridge with the Degen Chain, promoting its active market activities.

DegenChain is rapidly developing into the Las Vegas of the blockchain, providing a sandbox for cryptocurrency developers to explore community engagement through tips, rewards, and games.

Sharing of Well-Known Layer3 Projects

1. StarkWare Appchains

It is StarkWare's Layer3 solution, and StarkWare is one of the pioneers of Layer2 solutions.

StarkWare Appchains offer high customization, allowing developers to choose different consensus mechanisms, data availability models, network configurations, fee mechanisms, and even issue their own tokens for fees. By using Appchains, dApps can achieve better performance and cost-effectiveness on top of Starknet. Appchains allow performance optimization, increased throughput, and provide powerful custom solutions for decentralized applications. They can also achieve lower transaction costs and larger scale, providing a better user experience for users.

Related link: StarkWare Appchains

2. Nautilus Chain

It is a public chain launched by the Zebec community and is considered one of the latest Layer3 system architectures in the industry. With the support of Layer0 facilities such as Celestia and Eclipse, Nautilus Chain aims to provide parallel, high-speed EVM Rollup scaling solutions. Features of Nautilus Chain include modular chain design and enhanced privacy through ZK Rollup technology. The project also plans to launch global events to promote the popularization of Layer3 concepts and attract developer participation.

Related link: Nautilus Chain

3. ArbitrumOrbit

ArbitrumOrbit is a framework within the Arbitrum ecosystem that allows development teams to create and launch their own dedicated chains, which can be either Layer2 or Layer3 chains, and settle them on Arbitrum's Layer2 chains such as ArbitrumOne, ArbitrumNova, or ArbitrumGoerli.

Arbitrum Orbit provides unparalleled customization capabilities, allowing developers to customize their gas tokens, privacy settings, permission controls, and more according to the specific needs of their projects. Orbit chains utilize the Arbitrum Nitro technology stack, which is the most advanced blockchain scaling technology currently, and can benefit from future upgrades of the Nitro technology stack, including performance optimization, permissionless verification, and Arbitrum Stylus.

Related link: ArbitrumOrbit

4. zkSyncHyper Chain

zkSync is a Layer2 solution based on zero-knowledge proofs, and HyperChain is its proposed Layer3 solution. zkSyncHyperChain utilizes zero-knowledge proofs (ZKP), an encryption method that allows one party (prover) to prove a statement to another party (verifier) without revealing any information about the proof process. Unlike other solutions, zkSyncHyperChain can inherit the complete security of Ethereum because it uses ZK-rollups technology. This means that all transaction data will be verified on the Ethereum main chain, ensuring the same level of security as Ethereum. The goal of zkSyncHyperChain is to achieve super scalability, handling an infinite number of transactions without marginal impacts on security or costs.

Related link: zkSyncHyper Chain

5. DappLink

This is a generic Layer3 technology solution. DappLink adopts a modular and pluggable design, supporting different module plugins such as social games, DeFi, and more. This design allows for the launch of different Layer3 modules based on different application scenarios to meet specific needs. The core technologies of DappLink include cross-chain interoperability protocol, Layer3 reverse staking protocol, and Layer3AppChain. The cross-chain interoperability protocol supports a wide ecosystem, allowing assets to transfer between different chains; the Layer3 reverse staking protocol ensures the operation and security of the Layer3AppChain node network.

Related link: https://bridge.dapplink.xyz/home

These projects are just a small part of the Layer3 field, and many other projects are being explored and developed. With the development of blockchain technology and the changing market demand, we can expect to see more Layer3 projects in the future to meet the needs of different industries and application scenarios. The emergence and development of Layer3 projects signify the progress of blockchain technology in addressing scalability, cost, and security issues. The emergence of new things is always accompanied by controversy and questioning, but it is undeniable that this also further promotes the maturity and prosperity of the Web3 ecosystem.

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