Ethereum Layer 3, is it really useful?

In the realm of blockchain technology, Marc Boiron, CEO of Polygon Labs, has criticized Layer 3 (L3) networks on the Ethereum blockchain, arguing that they are not essential for network scalability and only serve to subtract value from the mainnet.

In a recent post on X (formerly Twitter), Marc Boiron expressed skepticism towards L3 networks, stating that Polygon Labs, a major Layer 2 (L2) scaling network for Ethereum, does not work on L3 networks because they are not deemed essential for the scalability of existing networks.

Boiron stated:
"L3 networks exist solely to siphon value from Ethereum and transfer it to the L2 networks on which they are built."

His comments sparked some doubts and triggered a debate among industry players. One respondent argued that while L2 networks on Ethereum are indeed valuable for the network, it is not possible to "take value away from Ethereum to transfer it to L2." In response, Boiron asserted:
"I disagree that the value of L2 is Ethereum's value. Take the issue to its extreme: if all L3s were to settle with one L2, Ethereum would gain virtually no value, and thus Ethereum's security would be at risk."

He further clarified that Polygon does not oppose the development of L3 protocols on other networks, including Polygon itself. However, he emphasized that their primary mission should remain making Ethereum more scalable while ensuring fair distribution of value between Polygon and Ethereum.

Layer 3 protocols are designed to operate on top of L2 and provide specific decentralized applications with improved scalability, performance, interoperability, customization, and economic efficiency.

Despite growing interest, the L3 sector remains relatively small, with only four L3 tokens listed on CoinGecko. Offchain Labs' Senior Partnership Manager, Peter Haymond, countered Boiron's arguments, highlighting the benefits of L3 networks that do not deplete Ethereum's value.

Among these benefits, he particularly emphasized the low cost of native bridging from L2, economically advantageous on-chain proofs, customized gas tokens, and specialized state transition functions.

Patrick McCorry, a researcher at the Arbitrum Foundation, also stated that L3 protocols offer interesting advantages, including the ability to transform L2 networks and leverage Ethereum for final security control.

The debate over L3 networks coincides with the recent launch of the Degen Chain network. Built on Arbitrum Orbit, Degen Chain was introduced by infrastructure provider Syndicate on March 28 as a specialized, low-cost network for the Degen (DEGEN) token.

This token has become the community's preferred option for users of the Farcaster Web3 social media service, which operates on Base, an Ethereum Layer 2 network. As a result, Degen Chain functions as a Layer 3 network, or simply L3.

It's worth noting that early adopters of Degen have turned small investments into substantial profits. A trader who initially invested less than $7,000 managed to realize profits of over $2 million.

While accumulating wealth through memecoin trading is not new in the cryptocurrency world, the adoption of Degen Chain as one of the first L3 chains to gain significant traction is a noteworthy event. On Degen Chain, an ecosystem of additional memecoins, denominated in DEGEN, has generated tens of millions of dollars in trading volume.