Cryptocurrencies come in all shapes and sizes and are often categorized based on their unique characteristics and use cases. Be it market leaders such as Bitcoin and Ethereum, stablecoins, or hundreds of trendsetting meme coins, crypto traders and investors are spoilt for choice. Yet, there are hidden gems to be found in distant corners of the crypto market. This blog post will discuss an often overlooked sector, the Layer 3-focused digital currencies.
Let’s dive into the Layer 3 space and explore the top coins dominating this space in 2025.
Understanding Layer 3 blockchain
Designed to counter the limitations of Layer 1 and Layer 2, the Layer 3 protocol marks an advancement in blockchain technology. It is built on top of the technological foundation laid by Layer 2 and offers functionalities and performance improvement over the Layer 2 protocol. Put simply, Layer-3 blockchains offer interoperability, host application-specific dApps, and boost the performance of blockchain technology.
Problems solved by Layer 3 blockchains
Layer 3 protocols solve several limitations of blockchain technology, which include:
- Scalability: Scalability is Layer 2’s thing, but Layer 3 makes the scalability of the blockchain ecosystem even greater by enabling high-volume transactions and complex applications, besides optimizing consensus mechanisms.
- Interoperability: What scalability is to Layer 2, interoperability is to Layer 3. Layer 3 solutions enable seamless data sharing, communication, and cross-chain collaboration between blockchains.
- dApps support: Layer 3 has the provision to host specialized dApps with sophisticated functionalities and the ability to improve the overall blockchain ecosystem and its underlying technology.
- Decongesting the main blockchain: Layer 3 solutions help decongest the main blockchain by processing certain transactions and operations off-chain. This reduces network congestion, which in turn, lowers transaction fees.
- Reduce costs: Layer 3 solutions aim to strike the right balance between lower costs and high performance. By doing so, they make the blockchain more accessible and scalable.
Top Layer 3 coins in 2025
Amid the frenzy over meme coins and AI-based coins, other crypto sectors seem to have taken a back seat. However, several Layer 3 coins have made their mark in the crypto market, and the top ones include the following:
(Note: The price, market cap, and ranking mentioned below are as of 21 January 2025)
Xai (XAI)
Current price: $0.18
Rank by market cap: #291
Market cap: $190.03M
XAI is often dubbed the first Layer 3 blockchain protocol created for top-tier gaming or AAA gaming. XAI was launched with two major goals—to counter the complexities associated with wallet management and to integrate blockchain into gaming seamlessly. This enabled traditional gamers to seamlessly own, trade, and interact with in-game assets. XAI is built on top of Arbitrum and developed by Offchain Labs and overseen by the Xai Foundation. The protocol brings a breath of fresh air into blockchain gaming, solving some of the challenges in the gaming space.
The XAI token, with its focus on gaming and DeFi, coupled with a growing ecosystem and strong community support, has the potential to become a strong player in the Web3 space.
Orbs (ORBS)
Current price: $0.02
Market cap: $108.74M
Rank by market cap: #415
Orbs is a Layer-3 public blockchain project that uses the proof-of-stake (PoS) consensus mechanism. Orbs improves upon existing smart contracts by adding features not available directly on other blockchain layers. It acts as a decentralized backend, making smart contracts more scalable and efficient. Besides, Orbs uses a multi-chain PoS model, which means people can stake their ORBS tokens on Ethereum and Polygon.
The ORBS token is forecast to end 2030 with a value of $0.16, making it a promising crypto.
Cartesi (CTSI)
Current price: $0.13
Market cap: $112.47M
Rank by market cap: #410
Cartesi is a layer 2 protocol built to overcome blockchain technology’s limitations like scalability and high fees. The platform allows developers to deploy smart contracts and dApps using common programming languages. It is powered by its native token, CTSI, which is used for staking and to pay for fees on the network.
CTSI token has performed well in the crypto market, gaining over 140% in price as per CoinMarketCap. The token has an all-time high of $1.75 recorded in May 2021, with experts anticipating the token to be priced between $1.36 and $1.60 by 2030.
Degen (DEGEN)
Current price: $0.007429
Market cap: $105.35M
Rank by market cap: #422
Degen (DEGEN) is a layer-3 protocol that leverages community engagement to boost its ecosystem. It aims to offer an efficient and interconnected blockchain ecosystem powered by its native token, DEGEN. It initially started as a reward token for participants in the Farcaster Degen channel and airdropped 15% of the total supply to its active members.
The DEGEN token is a newly emerging crypto which was launched in January 2024. In just over a year, the token has made significant strides in the crypto space and is a popular crypto among traders. Layer 3 crypto enthusiasts expect DEGEN price to touch $0.1.
Dream Machine Token (DMT)
Current price: $26.39
Market cap: $26,059,654
Rank by market cap: #1151
Dream Machine Games is a gaming platform that operates on the Arbitrum network. It blends NFTs and token-based gaming with social networking features to create a unique gaming experience. DMT is the native token of the blockchain-based gaming platform that powers the games on the Dream Machine. It is also used to reward network participants for their participation.
Despite being popular in the Layer 3 space, the DMT token is yet to attain mainstream adoption. However, with the growing focus on the DeFi and gaming space, the token holds great potential and is anticipated to reach $30 price level by 2030.
Conclusion
Layer 3 has brought innovation and improvement to blockchain technology. Besides addressing blockchain limitations such as scalability and interoperability, the growth of Layer 3 also gave a boost to Layer 3 coins such as XAI, ORBS, CTSI, DEGEN, and DMT. These Layer 3 coins are poised for growth in the next few years alongside Layer 3 protocols.
FAQs
What is the difference between Layer 1, Layer 2, and Layer 3?
Layer 1, Layer 2, and Layer 3 are built on top of each other, with each layer signifying an improvement in blockchain technology, delivering specific functionalities and services.
Layer 1 is the base or foundational layer that ensures security and basic blockchain functionality. Layer 1 enables activities such as confirming transactions and adding blocks.
Layer 2 protocol’s main function is to overcome the limitations in Layer 1 like scalability and transaction speed. To reduce the load on Layer 1, Layer 2 solutions that operate off-chain enhance scalability, reduce gas fees, and clear network congestion.
Layer 3, built atop Layer 2, brings interoperability to the blockchain ecosystem and contributes to better scalability. Another major advancement that Layer 3 brings is the ability to host application-specific dApps.
How do L1, L2, and L3 address the challenges of blockchain?
The blockchain technology faces three major roadblocks—security, scalability, and decentralization. To tackle these problems, Layer 1, Layer 2, and Layer 3 were developed, creating a more adaptable, efficient, and seamless blockchain ecosystem that any industry can tap into. Essentially, these layers handle various functions like data storage and help develop user-facing applications.
