Layer0 Protocols: the landscape for web 3.0

The Problem

Since the first mainstream iteration of blockchain in 2009 – Bitcoin – there has been a plethora of layer 1 blockchains launched with unique benefits and drawbacks. While the innovation and competition are fantastic, the current landscape of the crypto ecosystem is hindered from functioning at its maximum potential due to one key issue, interoperability.

To paint a picture, many of the different blockchains are built and optimized for different specific uses, for example, Ethereum is the largest Decentralized Finance (Defi) ecosystem because it’s very decentralized and secure, while Solana is a great gaming and NFT platform because it has high transaction throughput. However, on the downside, Ethereum isn’t highly scalable in its current state, and Solana, due to being very centralized, has gone down or been hacked on multiple occasions.

Since these, among many other blockchains, have different pros and cons wouldn’t it be great if there was a way for all of these ecosystems to integrate so users can easily jump between them for different tasks? The obvious answer is yes, but how do we connect all of these layer1 blockchains together to create a fully integrated ecosystem?

Introducing Layer0 Protocols

There are layer1, layer2, and even some layer3 blockchains, but the latest layer to be developed is layer 0 protocols in an effort to solve the interoperability issue and create a more integrated Web3 landscape.

While layer1s and layer2s are all similarly structured blockchains, Layer0 protocols are interesting because while they each do have a main blockchain, they are more a concept than they are a particular structure. This is because the different layer0 protocols all go about solving the interoperability problem in different ways.

There are quite a few layer0 protocols, but the prominent ones today are Avalanche, Cosmos, and Polkadot.

When thinking about a layer0 protocol the best way is to think about it less so as an underlying blockchain with other blockchains being built on top of it, and more so as a protocol, infrastructure, or networking framework that each layer 1 blockchain can build into their protocol allowing them to all interoperate – easily integrate and share information.

Simply Breaking down the most popular Layer0s

Because most layer0s function quite differently in many ways, the best way to understand them is by understanding on a simple level how each of them works.

Polkadot structure:

As demonstrated below, the Polkadot ecosystem is comprised of 3 key components:

1. The Relay chain which is the main Polkadot chain, this is the foundational blockchain that holds the data and orchestrates the ecosystem.

2. The parachains which are independent layer1 blockchains that essentially plug into the relay chain in order to be interoperable with the Polkadot ecosystem.

3. Bridges that connect the parachains to blockchains outside of the Polkadot ecosystem.

A Key differentiating factor that makes Polkadot unique from other layer0s is it only has 100 relay chain slots, making it a much more exclusive ecosystem, one could argue that this is a bad thing, although the barriers to entry could also be argued as a benefit because the quality of chains and protocols in the ecosystem would be much higher.

The parachain slots are auctioned off, these auctions are denominated in DOT Tokens – which is the native token for the ecosystem. In order for a layer1 to get a parachain slot they must outbid other layer1 chains, when a slot is secured the parachain must lock up its DOT tokens during the duration of which they are using the parachain slot, slots can be leased for 3 month periods with a maximum of 2 years upon which the slot will go back to auction, this ensures that projects in the ecosystem remain competitive.