What is a Layer-1, Layer-2 and Layer-3 Blockchain?

Layer-1, Layer-2 and Layer-3 are all commonly-used when talking about blockchains – but what do they mean, and what are the differences between them?

In short:

Layer-1 blockchains are major networks, such as Bitcoin, Ethereum and Solana. They are all-purpose, generalised tools, rather than optimised for a specific task. This means transaction speeds are low, and transaction costs are high.
Layer-2 blockchains are side networks, built on top of Layer-1 blockchains, such as Polygon, Immutable, and Base. They often support a specific niche, e.g. blockchain games, and process transactions away from the Layer-1 they support. This means transaction speeds are higher, and costs are lower.
Layer-3 blockchains are specialist networks, built on top of Layer-2 blockchains. They’re often built to support specific apps to prevent slowdowns on the Layer-2 they support. As they’re built specifically for one app, transaction speeds are very high, and costs are very low.

Want to dive deeper and learn how it all works? Read on…

Layer-1 blockchains

Layer-1 blockchains are the backbone of a decentralized world. They are responsible for processing and finalizing transactions at the pinnacle of security and integrity. Some of the most popular Layer-1 blockchains include Bitcoin (BTC), Ethereum (ETH), and Solana (SOL).

Bitcoin was the first Layer-1 blockchain. Bitcoin sacrifices speed and volume for outright security and integrity, so whilst it can handle a small volume of transactions well, once volume increases, it struggles to handle demand.

Ethereum expanded on Bitcoin by introducing smart contracts, enabling apps to integrate with blockchain – although the first widely-popular blockchain game, CryptoKitties, slowed Ethereum to such an extent that it spurned the creation of the first Layer-2 blockchains – more on that later.

Layer-1’s verify transaction authenticity via a network of nodes – individual units of computer hardware – before adding them to a block. Once a block of transactions is verified, it is pushed to the blockchain, finalising the transaction across the network.

Most Layer-1 blockchains cannot communicate between eachother, though there is growing demand for bridges – tools which allow this to happen, and can facilitate the transactions of assets across networks.

Layer-2 blockchains

Layer-2 blockchains build on Layer-1 blockchains by facilitating higher volume, faster speeds, and lower costs. They often specialise in a particular area (e.g. gaming), and ease the strain on Layer-1 blockchains by offloading some of the transactional burden, batching them together, and pushing them to the Layer-1 in one go.

This turns what could be tens, hundreds or thousands of transactions on a Layer-1 blockchain into a single transaction.

Polygon is one of the leading Layer-2 solutions for Ethereum. It uses an array of node networks to process transactions, batches them together, and then finalises them on Ethereum. By pushing one transaction on Polygon, you’re paying for a fraction of a transaction on Ethereum, meaning costs are lower, and speeds are much higher.

Immutable – a Layer-2 optimised for gaming – introduced zero-knowledge (ZK) rollups, which allow a huge volume of transactions to be verified and processed whilst limiting security flaws, giving blockchains a new level of reliable scalability.

Layer-2s that branch from the same Layer-1 can often communicate amongst eachother, allowing for much more cohesion and collaboration between apps.

Layer-3 blockchains

Layer-3 blockchains build on Layer-2 blockchains by processing specialist transactions – often for one particular app or tool – onto its own blockchain. This reduces the burden on Layer-2 blockchains, whilst ensuring high-volume apps and tools benefit from cheap, reliable and secure transactions.

Though there are comparatively fewer Layer-3 blockchains, some of them are quite notable, including Aavagotchi’s Gotchichain, Orbs, and Uniswap.