Layer 2 and Layer 3 Networks

When sending tokens to & from Rainbow make sure they are supported by the receiving wallet address!

With Ethereum being extremely secure and highly reliable, but it isn’t always well suited for speed and efficiency.

Transaction costs can be quite high at times, making it unfeasible for many people to use it. Because of this, the Ethereum ecosystem has started to create additional layers that are compatible with Ethereum and support its load. Here at Rainbow we call these extra layers "Networks", but you might also hear people call them Layer 2s, Layer 3s, and Sidechains.

In this guide, we’ll chat about what those networks are, how to use them, and additional resources you can use with them.

We currently support these Layer 2 networks:

We currently support these Layer 3 networks:

  • Coming soon!

What does this mean for you? It means inexpensive and instant transactions. On a network like Polygon, you might only pay $0.0005 in comparison to a $5 transaction on Ethereum.

Sidechains vs Layer 2’s vs Layer 3’s

There are 3 basic types of Networks: Layer 2s Layer 3s, and Sidechains.

  • sidechain is a totally distinct and separate blockchain that is compatible with Ethereum. It uses a different consensus mechanism than Ethereum and has its own security measures. Sidechains also tend to be more centralized than Ethereum. Assets can be moved back and forth between a Sidechain and Ethereum using a “bridge”. Polygon is an example of a Sidechain, and it's the first one we're supporting in the Rainbow app.
  • Layer 2 networks on the other hand are not separate blockchains. Instead, they combine large quantities of transactions off-chain (off of the Ethereum blockchain) before then submitting them bundled together on-chain, thus relying upon the same security and consensus mechanism as Ethereum.
  • Layer 3 networks work on top of Layer 2 solutions, connecting different Layer 2 networks and making it possible to do transactions across different blockchains, something regular Layer 2 solutions can't do.

Optimism is an example of a Layer 2 network, and it's the first one being added natively to Rainbow. Optimism is called an "optimistic rollup" because it "assumes the best" and defaults to submitting the minimum amount of information required with each bundle of transactions. In the case of fraud or dispute, additional information and documentation are then provided.

Which one is better?

Every network is different, and each comes with its own set of strengths and weaknesses. There isn't a single solution that can do everything, so you may find yourself wanting to use multiple networks depending on what you're trying to do.

  • For example, if you're wanting to distribute a lot of NFTs to many different people, it might make sense to use a Sidechain like Polygon.
  • If you like Ethereum because you trust its consensus mechanism and security, then Layer 2 networks might appeal to you more than a Sidechain because they are tied more closely to Ethereum.

How do you use networks?

In order to get started with Networks, you'll need to first send assets to the Network of your choice using its Bridge.

Once you have assets on the Network, you can then send them to friends, buy collectibles, use compatible apps, and much more. All while benefiting from the inexpensive and near-instant transactions.

Important notes:

  • Sidechains typically have a different cryptocurrency that is used for gas fees rather than ETH. For example, Polygon's native currency is Matic. You'll need at least a small amount of Matic to do anything on the Network.
Never send an asset on a Network like Polygon or Optimism to a wallet address that doesn't support it.