Layer 1 Blockchain - A layer one blockchain refers to the foundational infrastructure of a blockchain network. It includes the underlying protocol and consensus mechanism that allows for the creation and validation of blocks, as well as the storage and distribution of data across the network. It is the foundation upon which other features and functionality, such as smart contracts and decentralized applications, are built. Examples of layer one blockchains include Bitcoin and Ethereum.
Layer 2 Blockchain - A layer two blockchain refers to additional protocols or solutions that build on top of the foundational infrastructure of a layer one blockchain. These solutions are designed to improve scalability, security, and functionality of the blockchain network. Examples of layer two solutions include off-chain transactions, sidechains, and state channels.
Off-chain transactions refer to the execution of transactions outside of the main blockchain but still being recorded on it.
Sidechains allow for the creation of separate blockchains that are connected to the main blockchain and can handle a higher volume of transactions.
State channels allow for off-chain transactions between parties without the need to broadcast every transaction on the main blockchain. These solutions are designed to increase the overall capacity of the network, allowing for more transactions to be processed and enabling more complex use cases.
Layer 3 Blockchain - Layer 3 blockchain refers to solutions that build on top of layer 1 and layer 2 blockchains, and are focused on providing specific functionality or addressing specific use cases.
Layer 3 solutions are often referred to as "application-specific blockchains" as they are built to serve a specific purpose or solve a specific problem. They are usually built on top of existing layer 1 and layer 2 blockchains, leveraging their underlying infrastructure and security.
Examples of Layer 3 blockchain are:
Decentralized Finance (DeFi) platforms, which provide financial services such as lending, borrowing, and trading on the blockchain.
Identity verification platforms, which use blockchain technology to provide secure and decentralized digital identities.
Supply chain management platforms, which use blockchain technology to track the movement of goods and ensure transparency and accountability in supply chain operations.
Gaming platforms, which use blockchain technology to provide secure and transparent in-game economies, allowing players to trade virtual assets.
Voting systems, which use blockchain technology to provide secure and transparent voting systems that are resistant to tampering and fraud.
Overall, Layer 3 blockchain solutions aim to provide more specific and advanced functionalities on top of the underlying blockchain infrastructure.