Blockchain Vocabulary - Protocol Layers (29/30)

Layer 0: Enables interoperability between layer 1 protocols (e.g. Cosmos)

Layer 1: The base blockchain network that validates transactions but may have limited scaling capabilities (e.g. Ethereum)

Layer 2: A scaling solution to layer 1 protocols that create a secondary framework that is used to process transactions off-chain and then settle into the layer 1 protocol (e.g. Optimism)

Layer 3: Enables blockchain-based apps, games, and more as the application layer (e.g. Helium)

In the first stage of the internet, most of the value was captured in layer 3, the application layer. Facebook and Amazon accrued all the value, while the public internet protocols were technically worthless. In blockchain structures, it is possible and common to build monetization and incentives into multiple layers of the technology stack.

Further reading: https://ethereum.org/en/layer-2/