by Claude Donzé – Jun 12, 2024

We’re excited to co-lead Layer3’s $15M Series A alongside ParaFi Capital, with Electric Capital, King River, Immutable, Lattice, Tioga, LeadBlock, Amber, Stateless, and GD1 also participating in the round. Layer3 is building the onchain value distribution platform to serve and connect two distinct groups: A) crypto users who want to explore Web3 in a guided and trusted way and get rewarded for their actions and attention, and B) Networks, protocols, and dApps that want to attract and retain the right users.

Users are searching for guided and trusted experiences in crypto

Users want to learn about crypto, explore, and use new networks, protocols, and dApps. In crypto, contrary to Web2, their attention and time can be rewarded without friction through token incentives (e.g., Airdrops, liquidity mining programs, etc.). Users seek a platform with crypto projects curated according to a certain quality standard. In addition, they expect to be compensated for their related onchain activity.

Protocols want to attract and retain the right users

Protocols, networks and dApps want and need to a) attract and b) retain the right users. However, the current paradigm of user acquisition and retention in Web3 is broken; methods and incentives are often very naive, favor certain groups or are gameable, which ultimately doesn’t lead to the desired user acquisition and retention. In Web2, startups would allocate up to 40% of their raised capital toward user acquisition on centralized platforms like Google, Meta and Amazon. In crypto, tokens have emerged as a powerful new tool for user acquisition and growth. Rather than spending fiat on centralized advertising platforms, projects can allocate a portion of their token supply to incentivize user behaviors and participation. 

This shift presents a massive opportunity to build a decentralized distribution network that routes tokens to the most valuable users based on their onchain activity – Layer3 is building the platform to do exactly that.

Attention – action – reward – repeat

The rapid growth of crypto has led to a proliferation of Layer1 networks, Layer2 scaling solutions and dApps, each with their own native tokens. As of June 2024, the top 20 blockchain ecosystems alone hold over $25B worth of tokens in their treasuries, earmarked for distribution to users and stakeholders. This value is only going to grow: thousands of projects will release their own tokens in the coming years and the overall market value of those tokens will rise in the coming years, and tokens will become the primary tool of incentivization on the internet. 

In Web2, the digital advertising market alone (excluding other forms of user acquisition and retention methods) is $350B and growing at a 15% CAGR. Multiple companies that became big through digital ad spending, like Meta and Google, have market caps of multiple trillion dollars.

We believe that Layer3’s omnichain identity and distribution protocol creates an unrivaled flywheel effect in multiple areas: crypto consumers discover new projects and projects reward their onchain activity – with every project bringing new users, and new users bringing new projects to Layer3. Being the platform where both users and projects come together, Layer3 is in the unique position of gathering valuable insights on what users want, how they act online and onchain and how those needs are served by existing protocols and dApps. Additionally, Layer3 can observe what incentives work and how to design them for protocols to reach their goals – ultimately, every dollar spent on Layer3 will be more efficient than spent anywhere else, leading projects to route more value through Layer3, which attracts more users to Layer3. 

As the internet moves onchain, we foresee that Layer3 will have a unique understanding of its users, through onchain asset and social graphs, which ultimately will allow projects on Layer3 to target, convert and retain more users than any other platforms on the internet. Through that, Layer3 contributes directly to a future in which the value generated from attention and engagement accrues directly to the users.

More than 3.5 million unique users

Both users and protocols love Layer3: Uniswap, Base, Solana, Arbitrum, Linea, Polygon, Gnosis, Avalanche, Celo, Scroll, and more than a hundred other crypto teams are already distributing value on Layer3. The platform has served over 3.5 million unique users in 120 countries to date and Layer3’s distribution protocol supports 25 different blockchains across the EVM and Solana ecosystem. With our proprietary data platform Greenfield HARVEST, we’ve verified user, traction and retention data onchain, which has strengthened our investment decision. An interesting finding was that users new to crypto are more active onchain vs. other users if they’re a Layer3 user – which makes Layer3 users especially compelling to protocols and dApps. 

Layer3 is becoming a destination on the internet where both users and protocols gather, meet and exchange – with many interesting interactions, features and products yet to come. 

Layer3 was founded by Brandon Kumar and Dariya Khojasteh and we’ve been following them since the beginning of their journey with Layer3. We are thrilled to be partnering with them and supporting them in building the onchain value distribution platform. 

Participate in Layer3

There are various ways to participate in the Layer3 ecosystem: You can gain firsthand experience by becoming a user and exploring their app. If you’re a protocol or dApp wanting to onboard users through Layer3, you can go through their onboarding process here. You can follow Layer3’s progress on Twitter and join their Discord to contribute to discussions actively. 

If you’re really excited about what Layer3 is building – they’re hiring engineers! You can send your github/resume with a summary of your skills and experience to jobs@layer3.xyz.