How L1 and L2 Projects Steal the Spotlight Key L3 Projects to Watch

BeeNews Report:
Over the past few years, Ethereum has made significant strides, completing its roadmap transition from Proof of Work (PoW) to Proof of Stake (PoS) with “The Merge.” Recently, Ethereum also underwent the “Dencun” upgrade, which includes proto-danksharding, making Layer 2 transactions much cheaper.


Prior to Dencun, Layer 2 transaction fees were around $0.50, whereas now, most Layer 2 chains see fees as low as one or two cents. This change has greatly facilitated the expansion of new applications on Ethereum.


Since the Dencun upgrade, the daily transaction volumes on Arbitrum and Base have surpassed those on the Ethereum mainnet, a trend that continues unchanged. Despite ongoing challenges in Ethereum’s scalability, this marks a significant step in the right direction, with infrastructure improvements since the last cycle. Activity and transaction volumes on Arbitrum and Base chains have surged in recent months, likely just the tip of the iceberg for this cycle.
Layer 3 Expansion
Initial rollups for Ethereum included Optimism and Arbitrum, both utilizing optimistic rollups technology. Currently, there’s a growing presence of Layer 2 optimistic and zero-knowledge rollups, mostly classified as general-purpose solutions. Application choices on which rollup to operate or build upon depend on required features and security needs. For instance, applications like Uniswap can operate on a general-purpose Layer 2 like Arbitrum One. However, for crypto games or NFT projects needing higher throughput or extremely low transaction fees (e.g., $0.0001), Layer 3 solutions come into play.


Examples of Layer 3 frameworks include Arbitrum Orbit and zkSync Hyperchains. While Layer 3 is still in its early stages, changes and improvements are anticipated in the future. The core idea of Layer 3 is to further expand Ethereum by creating highly customizable, inexpensive, fast, and interoperable chains, offering varying degrees of security and decentralization.
Degen Chain (DEGEN)
Degen Chain is an emerging innovative blockchain launched in January 2024, quickly gaining attention, with a fully diluted valuation (FDV) exceeding $2 billion within three months of launch.


Initially introduced on Farcaster’s Degen channel, it’s a new social app allowing users to “tip” quality content.
Built on Arbitrum Orbit, settling into Base, and ensuring data availability through AnyTrust, the chain’s initial frenzy led to a surge in Total Value Locked (TVL), though stabilizing thereafter, alongside adjustments in DEGEN’s price.
Sanko (DMT)
Another intriguing Layer 3 application is Sanko, built on Arbitrum Orbit, settling into Arbitrum L2, and ensuring data availability through AnyTrust. Sanko focuses primarily on the NFT and gaming sectors, leveraging Layer 3 advantages of low cost and high throughput. The native token DMT has shown impressive performance in 2024.


Dream Machine, an interesting application of Sanko Layer 3, combines social and gaming elements. Sanko.TV integrates gaming and streaming entertainment, where users can buy passes to support favorite streamers and gain access to private chat rooms, similar to operations at Friend.tech.


Sanko showcases the customizability of Layer 3 chains, highlighting its potential. The rise in DMT price reflects sustained interest in Sanko’s innovative blend of gaming and social interaction. With social apps gaining momentum, Sanko is undoubtedly a project worth watching.
The Future of Layer 3
Layer 2 mainnets have been operational for several years, significantly advancing Ethereum’s scalability. While the scalability roadmap continues to evolve, Layer 3 with its high customizability seems the logical next step. Numerous projects are already experimenting on Layer 3 with varying degrees of progress.
However, an interesting use case and brief hype don’t necessarily translate to a good investment. In our discussed examples (DEGEN and DMT), native tokens have experienced significant volatility, and these chains are far from proven. Nonetheless, with Layer 2 expansion and transaction costs as low as one or two cents, opportunities and use cases have expanded greatly. It’s crucial to track trends in application types driven by increased throughput and customizability—Layer 3 undoubtedly brings some intriguing investment opportunities