Did you know that the daily Ethereum transaction volume increased to 1.6 million per day just in 2025? As different layers increase gas fees, users are increasingly adopting Layer 2 solutions. This relation between demand and cost makes one thing clear: blockchain is powerful yet complex, and this complexity is not optional but essential, especially for businesses aiming to build or integrate on-chain.
Just like the OSI model in networking, blockchain architectures are divided into layers, clarifying the role of each component, like where consensus happens, the location of transactions executing, how data is stored, and how apps interact with the system. One of the most popular frameworks today in the Web3 industry is the L0-L3 model; however, academics and enterprises also discuss 5 and 7 Layer models.
Basics of Blockchain Architecture
Like the OSI networking model, blockchains are designed in modular layers to organize internet communication into seven layers. This layered architecture enables the system to scale, adapt, and innovate more easily. Each layer handles a different function, allowing developers to improve one part without disrupting the entire system.
This approach provides scalability, Layer 2 solutions that can handle more transactions without changing Layer 1, flexibility, which allows new blockchains or dApps to be added on higher layers without changing the structure, and innovation. Specialized layers, like the smart contract layer, encourage experimentation and new use cases.
The 5-Layer Blockchain Model
Blockchain’s structure is broken down into five functional layers, each depending on the others, from physical infrastructure to user-friendly applications:
- Application Layer: Top layer where decentralized applications (dApps), wallets, and other tools are built. For example, Uniswap, OpenSea, or MetaMask.
- Service Layer: This layer provides smart contracts and middleware services like Ethereum’s solidity-based contracts.
- Protocol Layer: It defines rules of consensus (like Proof of Work and Proof of Stake) that all nodes follow to agree on the ledger’s state.
- Network Layer: Manages peer-to-peer communication between blockchain nodes, like the Gossip protocol used in Bitcoin.
- Infrastructure Layer: The foundation of servers, hardware, and data storage, like mining rigs or validator nodes.
The 7-Layer Blockchain Model
The 7-layer model enhances the framework for greater precision, making it particularly useful in academic research and enterprise environments. It breaks blockchain into seven functional components:
- Data Layer: This layer is concerned with handling block structures, chains, and storage.
- Network Layer: The P2P communication layer is for node-to-node propagation.
- Consensus Layer: It ensures agreement on valid transactions.
- Incentive Layer: It provides rewards for miners/validators.
- Contract Layer: The layer hosts smart contracts and business logic.
- Application Layer: Hosts decentralized services and dApps.
- User Layer: This is where users interact with interfaces, like wallets, a web browser, or a mobile app.
What do Layers (L0-L3) Mean in Blockchain?
While 5—or 7 Layer architectures are mostly used, the Layer 0 to 3 model has become a widely adopted method of explaining blockchain in the Web3 industry. This structure balances technical depth with accessibility.
- Layer 0 (Infrastructure): This is the bottom and foundational layer that connects multiple blockchains and provides interoperability. Projects like Polkadot, Cosmos, and Avalanche make it easier to launch and connect new blockchains without rebuilding core components.
- Layer 1 (Base Protocol): The next layer is the base protocol, which uses core blockchains like Bitcoin, Ethereum, and Solana that validate and secure transactions through consensus mechanisms and provide decentralization and security.
- Layer 2 (Scaling Solutions): This layer is built on top of Layer 1 and includes rollups, sidechains, and state channels, like Polygon, Arbitrum, Optimism, and Lightning Network.
- Layer 3 (Applications): This is the user-facing Layer where dApps, NFTs, DeFi protocols, and wallets exist. Platforms like OpenSea, Uniswap, Aave, and MetaMask are based here.
Why a Layered Structure Matters in Blockchain Technology?
A layered structure resolves issues like the blockchain trilemma by striking a balance among scalability, security, and decentralization. It assigns different responsibilities to layers to prevent the blockchain from overburdening a single protocol. For example, Layer 1 chains like Ethereum secure the network, while Layer 2 solutions, such as rollups, focus on cost efficiency.
Interoperability is equally important, which is made possible by Layer 0 frameworks like Polkadot and Cosmos. They allow independent blockchains to exchange data and value seamlessly, promoting an interconnected ecosystem rather than isolated networks. With strong security foundations and scalable transaction layers, interoperability directly benefits user adoption. Businesses can build reliable applications on secure infrastructure, and users can also enjoy faster, cheaper, and safer access to dApps, DeFi, and NFTs.
Blockchain Layer 0 (The Foundation)
Layer 0 is the base of blockchain ecosystems, providing the infrastructure that supports communication between independent blockchains. Layer 0 protocols enable interoperability and cross-chain functionality, ensuring blockchains are not isolated from others. These frameworks supply consensus mechanisms, validator networks, and cross-chain messaging systems that allow new blockchains to be built more efficiently.
Some popular examples include Polkadot (which uses parachains and relay chains to connect multiple blockchains), Cosmos (which works on the Inter-Blockchain Communication protocol to allow seamless asset and data transfers), and Avalanche (which introduces customizable subnets to let developers launch purpose-built blockchains).
Blockchain Layer 1 (Base Protocol)
Layer 1 blockchains are responsible for executing transactions, maintaining the distributed ledger, and securing the network through consensus, building the foundation of a decentralized ecosystem. Bitcoin introduced Proof of Work (PoW), where miners solve cryptographic puzzles to validate transactions. Ethereum has now transitioned to Proof of Stake (PoS), where validators secure the network by staking assets.
These networks ensure security and decentralization, but face scalability limitations. Bitcoin processes around 7 TPS, Ethereum handles 15-30 TPS, which can lead to network congestion and high fees during peak demands.
Blockchain Layer 2 (Scaling Layer)
The second layer contains a collection of scaling protocols built on top of Layer 1. This layer improves transaction speed and reduces costs while depending on Layer 1 for security.
The key solutions of this layer include optimistic rollups, like Optimism and Arbitrum, which assume transactions are valid by default and only run fraud proofs when challenged. Zk-rollups are used to batch and verify transactions more efficiently. It also uses sidechains to run parallel transactions and state channels for quick, low-cost microtransactions off-chain before getting back to the main chain.
The execution of transactions off the base layer while anchoring to layer 1 provides a balance between efficiency and security. It further improves user experience and makes the transactions cheaper and faster.
Blockchain Layer 3 (Application Layer)
The third layer directly connects blockchain infrastructure with end users. This includes decentralized applications, crypto wallets, NFT marketplaces, and DeFi platforms, just like users use Uniswap for decentralized trading, OpenSea for NFTs, or Aave for lending and borrowing.
Unlike the other layers, Layer 3 is highly visible to the users and determines the user’s blockchain experience, which further adds to driving adoption. Take this as easy-to-use wallets or Web2 logins with low entry barriers and compliance with global regulation, which ensures massive mainstream adoption and long-term trust.
Layer 0 vs Layer 1 vs Layer 2 vs Layer 3: Key Differences
Each layer serves a distinct role in the blockchain architecture. Like Layer 0 enables interoperability and shared protocols, Layer 1 contains base blockchains, consensus, and transaction validation. Layer 2 is used for scaling and handles throughput or cost issues; lastly, Layer 3 delivers value to end-users. Understanding the differences helps businesses decide where to build, the trade-offs, and risks that might exist.
The table below shows key differences between all 4 layers:
| Layer | Purpose | Examples | Strengths | Challenges |
| Layer 0 | It enables shared security and cross-chain functionality | Polkadot, Avalanche, Cosmos | Enables interoperabilityBuilds groundwork for multiple L1sHas scalability potential | Complex in designRisk of bottleneckSometimes uses less mature tools |
| Layer 1 | It is responsible for validating transactions while ensuring security and decentralization and maintaining protocol and ledger rules | Bitcoin, Solana, Ethereum | SecureOffers high decentralizationBuilds trust | Has scalability constraintsHigh transaction feesSlow throughput |
| Layer 2 | Handles transactions off-chain or in effective ways while reducing cost and latency | Optimistic and zk-rollups, sidechains, Polygon, Lightning Network | Improved speedReduced feesBetter UXMitigates congestion on L1 | Dependency on L1 for securityData availability issuesTrade-offs in decentralization |
| Layer 3 | End-user dApps, wallets, DeFi, NFT marketplaces | Orbs, Arbitrum Orbit, zkSync Hyperchains, Cosmos inter-blockchain communication protocol | Adds value to usersBoosts adoptionIntegrates with Web2 | Relies on lower layersSmart contracts increases security risksUsability and integration challenges |
How Blockchain Layered Architecture is Evolving
Blockchain architectures started from monolithic designs, where a single chain was responsible for managing data availability, execution, consensus, and settlement. Today, these architectures have evolved to modular blockchains, like Celestia, where the key focus is on data availability and consensus, while leaving execution to rollup or other layers. This division of responsibility adds to the flexibility of architecture, allowing developers to choose or build execution layers based on their needs while sticking to security and data available on the shared infrastructure.
Interoperability is another factor that is evolving the blockchain layered architecture. This can be seen in protocols like Cosmos that allow different chains to exchange assets, allowing different blockchains to interact using IBC. Moreover, trends like ZK-rollups boost scalability and privacy by merging zero-knowledge proofs with off-chain execution while reducing gas and resource cost, or hybrid apps are emerging with a Web2 interface and services with a Web3 strong back-end to reduce friction. These trends are a result of flexible, interoperable, and user-friendly blockchain ecosystems.
Examining the evolution of layered blockchain architecture, continued growth in modular architecture, increased adoption of interoperability protocols, and enhanced privacy are expected to lead to cost efficiency in the future.
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H2: FAQs (Frequently Asked Questions)
Q: Do all blockchains need a Layer 0?
No, not all blockchains require Layer 0. Many blockchains, like early Ethereum or Bitcoin, operate on Layer 1 without a dedicated Layer 0.
Q: What is the blockchain trilemma, and how do layers help solve it?
The blockchain trilemma refers to balancing decentralization, security, and scalability. Different layers help distribute responsibilities; for example, L1 focuses on decentralization and security, while L2 focuses on scalability.
Q: Why are transactions on Ethereum so expensive if there are layers?
Transactions are expensive when conducted on Ethereum’s Layer 1. This is due to network congestion, and Layer 2s were built to solve this issue, reducing fees for transactions conducted on Arbitrum or Optimism.
Q: Can Layer 2 blockchains ever fully replace Layer 1?
No, Layer 2 blockchains are designed to work on top of Layer 1 for security and final settlement.
Q: Is Bitcoin stuck at Layer 1, or does it have Layer 2 and 3?
No, Bitcoin has a Layer 2 (Lightning Network) for scaling transactions and Layer 3 apps built on top.
Q: Which layer is best for NFTs?
There is no single best layer for NFTs; the choice depends on user requirements. Some users consider Layer 2 as a better scaling solution (like Arbitrum, Polygon, or Immutable X), speed, and cost-effectiveness, which is ideal for high volumes of transactions. However, Layer 1 blockchains remain important due to their security and decentralization, but with high fees and network congestion
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