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L3s and app chains

Lesson 14 of 58 in the course “Crypto”. Free, with animations and a quiz.

What an L3 is

An L3 (Layer 3) is a network that writes its summaries not to Ethereum but to an L2, such as Arbitrum or Base. The L2 then writes everything to Ethereum. Layers inside layers. Why bother? A single app, such as a game, needs thousands of cheap actions per minute and its own rules: gas in its own token, custom settings. Building a separate L1 for that is slow and expensive, while an L3 is assembled from a ready-made kit.

Real examples

Xai is a gaming chain built with Arbitrum Orbit on top of Arbitrum. Degen Chain is an L3 on top of Base, launched around the DEGEN memecoin: it took off on hype in 2024 and in May of that year stopped for about two days. A good illustration: a small chain means a small team, and an outage hits every user at once. Note that many “app chains” on the OP Stack, such as Uniswap’s Unichain, are L2s, not L3s. The layer number only tells you where the chain writes its data.

Pros, cons and a checklist

The upside of an L3 is cheapness and flexibility for one app. The downsides grow with every layer. You trust not only Ethereum, but also the L2 team and the L3 team. Liquidity is thin, so a big swap moves the price a lot. Exiting takes two steps, L3 → L2 → L1, each with its own delay. And “we are an L3” is sometimes just marketing. Rule: bring into an L3 only what you need for a specific game or app, and do not keep your savings there.

Check yourself

  1. Where does an L3 write its data?
    Correct answer: To an L2, and the L2 writes to the L1. The layer number shows where the network reports: L3 → L2 → L1.
  2. A game on an L3 offers a deposit bonus. How much is sensible to bring?
    Correct answer: What you need for the game, not your savings. Every extra layer is one more trust and one more point of failure. A bonus does not cover the risk of losing everything.
  3. Unichain is built on the OP Stack and writes data straight to Ethereum. Which layer is it?
    Correct answer: L2. It writes straight to Ethereum, so it is an L2, even if it is one app’s chain.

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