Third layer blockchains are being rapidly developed: Addressing state-of-the-art paradigms and future horizons

Abstract

Undoubtedly, blockchain technology has emerged as one of the most fascinating advancements in recent decades. Its rapid development has attracted a diverse range of experts from various fields. Over the past five years, numerous blockchains have been launched, hosting a multitude of applications with varying objectives. However, a key limitation of blockchain-based services and applications is their isolation within their respective host blockchains, preventing them from recording or accessing data from other blockchains. This limitation has spurred developers to explore solutions for connecting different blockchains without relying on centralized intermediaries. This new wave of projects, officially called Layer 3 projects (L3) initiatives, has introduced innovative concepts like cross-chain transactions, multi-chain frameworks, hyper-chains, and more. This study provides an overview of these significant concepts and L3 projects while categorizing them into interoperability and scalability solutions. We then discuss opportunities, challenges, and future horizons of L3 solutions and present a SWOT (Strengths–Weaknesses–Opportunities–Threats) analysis of the two groups of L3 solutions and all other proposals. As an important part, we introduce the concept of Universal decentralized finance (DeFi) as one the most exciting applications of L3s which decreases transaction costs, enhances the security of crowdfunding, and provides many improvements in distributed lending-borrowing processes. The final part of this study maps the blockchain’s triangle problem on L3s and identifies current challenges from the L3’s perspective. Ultimately, the future directions of L3 for both academic and industry sectors are discussed.