by Claude Donzé – February 21, 2025

We’re excited to announce our follow-on investment in Layer3, deepening our position in the leading Engagement Network. We accumulated an additional $4M of $L3 tokens, making Layer3 one of the largest holdings across our funds. In 2024, Layer3 increased revenue tenfold to $16.6M while operating with a team of just 16 people. They remained profitable throughout the year, placing them in the top decile of companies in the industry. Beyond financial performance, they have consistently expanded their customer base, product suite, and consumer footprint. We believe Layer3 has one of the strongest execution teams in crypto. This article outlines why we more than doubled our position in $L3 and why Layer3 should be valued like an L1.

The best investment opportunities arise when the market fundamentally misprices an asset relative to its long-term potential.

Certain market participants currently misunderstand Layer3, creating an attractive entry point for what we believe will become one of the most dominant platforms in crypto.

While some view Layer3 as just a Quest platform, few recognize the scale of economic activity it facilitates and its projected growth. A helpful analogy is Layer 1 networks: L1s attract users who consume blockspace, driving exponential demand as builders create new applications. As network activity scales, fees grow proportionally. Layer3 has the same characteristics. Its infrastructure serves as a foundational network that connects protocols with users and enables value transfer. As more projects integrate, each incremental unit of activity compounds, generating powerful network effects. This, combined with their direct ownership of the end-user, positions Layer3’s appropriate comps closer to base layers or dominant aggregators like Google and Meta rather than traditional app-layer projects.

Thesis Overview

There are five core components to our investment thesis: 

1. Product:
   Layer3 has established a strong product-market fit and one of the most defensible flywheels in the market, positioning them to own a greater number of users in crypto.
2. Token:
   The $L3 token is an economic engine that benefits from increased platform demand, coupled with an ongoing buyback from ~$20M annualized revenue. 
3. Team:
   The Layer3 team is one of the industry’s most high-performing and disciplined. It aggressively executes while maintaining resource efficiency.
4. Macro:
   Given its market and current position, the broader macro setup is highly favorable to $L3.
5. Engagement network:
   Layer3 is pioneering an entirely new vertical of crypto networks.

1. Product 

Layer3 has established a strong product market fit. They have processed over 150 million transactions from over 2 million users across 36 chains and powered growth for over 600 unique applications. This traction is ultimately evidenced in their bottom line. More importantly, it has built one of the most defensible flywheels in the market:

• Protocols like Uniswap, Base and others use Layer3 to distribute value and acquire users onchain, increasing the value transfer on the platform.
• As more value is transferred, more users come to Layer3 to complete onchain activations and earn rewards.
• As more users come to Layer3, more protocols choose to use Layer3’s infrastructure to acquire users.

We believe the network effects at play are akin to Amazon or Shopify, where a growing number of sellers attracts more buyers, and more buyers attract additional sellers, creating exponential growth in activity and value. 

Extending this to the current crypto market, they are positioned well in an environment where blockspace continues to be overfunded, coupled with shortening attention spans and the rise of memecoins means the cost of acquiring users has increased dramatically. As with traditional Internet businesses, spend to acquire users will go to the most efficient distribution channels.

Bottom Line: Layer3 is the most efficient router of onchain attention. 

While routing human attention is exciting in itself, Layer3 recently announced one of its most groundbreaking products yet: Layer3 Intel. Intel allows autonomous agents to stake $L3 to deploy incentives, creating the first onchain agent-to-agent and agent-to-human marketplaces. The staking mechanism acts as both a security measure and an alignment tool, ensuring agents have skin in the game when participating in the Layer3 ecosystem. At Greenfield, we believe that a dominant share of total onchain transactions will be done by agents in 3 years from now.

What’s interesting and less well-known is Layer3’s ability to compound their relationship with the end user through a broader product suite. In addition to their core value transfer protocol, they’ve built a suite of consumer products with best-in-class engagement:

• Their Trade product has facilitated over $200 million in total volume. 
• Their Predictions product has generated ~$500k in revenue after being live for only one quarter. 
• Their Races product has coordinated hundreds of thousands of transactions across EVM & Solana. 
• Their Guilds product has seen wild adoption with over 874 guilds, including over 12k $L3 stakers.

In short, Layer3 is an attention hub unlike anything crypto has seen and as we know, where attention goes, value flows.

2. Token

The economic engine behind this attention hub is the $L3 token, which drives significant demand across Layer3’s ecosystem.

Utility & Defensibility

• Default Platform Currency:
  $L3 is the default currency across seven major chains, including Ethereum Mainnet, Base, Optimism, Arbitrum, Polygon, BNB Chain, and Solana. Spending $L3 offers users a 25% reward boost, with tokens retired from circulation after use – creating deflationary pressure as adoption grows.
• Liquidity on L2s:
  $L3 is accessible across two L1s and five L2s, with more chains launching soon. This broad availability enhances usability, making $L3 one of the most widely integrated tokens.

Incentives & Growth

• ETH Buybacks:
  Layer3 converts ETH fees earned from credential mints and incentives into $L3 buybacks, fueling platform growth and aligning incentives with deflationary pressure.
• Reward Auto-Conversion:
  Over $8M+ in platform incentives have already been distributed, with auto-conversion allowing users to instantly convert rewards into $L3, therefore driving demand.
• Layered Staking:
  Staking $L3 unlocks exclusive opportunities like quests, campaigns, and onchain activations, creating a self-reinforcing ecosystem where token distribution aligns with network growth and user engagement.

Together, these mechanisms create a self-reinforcing cycle of adoption, usage, and value transfer. As Layer3 scales, every transaction deepens the token’s utility while driving exponential growth across the platform.

Layer3’s token powers an emerging ecosystem and captures value from the rapidly growing GDP of crypto markets. As crypto adoption accelerates over the next decade, $L3 is positioned to route significant economic activity, becoming a critical bridge for value transfer between protocols and consumers.

3. Team

Since our initial investment in the summer of 2024, we’ve worked closely with Layer3’s co-founders, Dariya and Brandon, as well as their broader team. This experience has only deepened our conviction in their ability to execute, stemming from four key factors:

1. Complementary Founders:
   Brandon and Dariya bring distinct yet complementary skill sets. Brandon leads business development, sales, and investor relations, while Dariya drives product strategy and product marketing. Having backed many founding teams, we deeply appreciate the advantage of two leaders who can divide and conquer.
2. Efficiency:
   Operating with just 16 full-time employees, Layer3 is one of the most capital-efficient and profitable companies in the industry on a per-employee basis.
3. Velocity:
   They ship at an extraordinary pace, are often the first to deploy on new chains and have built a rapid product development effort. A recent example was their ability to bring Layer3 Intel to market after a 1 week hackathon. 
4. Long-Term Vision:
   Beyond execution, they are deeply committed to building an enduring platform. This is evident not only in our conversations with them but also in how they’ve positioned the company for the years ahead.

Ultimately, the most successful venture investments start with backing the right team at the right price. Nowhere is this more true than with Layer3.

4. Macro

Beyond the favorable regulatory environment, several macro catalysts position Layer3 for long-term success.

First, attention is one of the scarcest and most valuable assets in today’s digital economy, and Layer3 is the marketplace for attention. With a direct relationship to over 2M users, driving growth across 36 chains and 600+ applications, Layer3 sits at the center of an increasingly competitive landscape for user acquisition. As blockspace continues to be overfunded, larger treasuries are all competing for end-user attention. Just as 40% of venture funding flowed into Facebook and Google ads, we believe Layer3 is positioned to capture the lion’s share of onchain user acquisition spend. Additionally, the rise of memecoins has further fragmented retail attention, forcing teams to increase their marketing budgets while seeking more efficient distribution channels—something Layer3 is uniquely designed to provide.

Second, onchain agents will dominate transaction flow within the next three years. Agents operate continuously, executing recurring, event-based, automated, and conviction-driven transactions while identifying inefficiencies at speeds impossible for humans. Layer3’s Intel product expands its total addressable market beyond human-driven transactions, enabling agent-driven interactions that route incentives and rewards through Layer3 – further accruing value to $L3, the liquid attention asset.

Third, a growing share of the world’s value is moving onchain. As this trend accelerates, Layer3’s role as the most efficient router of onchain attention will only strengthen. If you extend the timeline, the flywheel Layer3 has built enables it to be the fundamental coordination layer for economic activity onchain. Just as early internet aggregators became dominant access points for digital commerce, Layer3 is positioned to become the default access point for onchain attention and value transfer.

5. Enter Engagement Networks

All of the above, combined with our team’s vast experience in ad networks (Jascha, Andrzej, Mateusz, Christian, Johann), makes it clear for us that what Layer3 is building is the next iteration of ad networks that have become some of the largest companies in the world, such as Google and Meta. Layer3 is pioneering an entirely new vertical in crypto, which we call Engagement Networks. Engagement Networks, made possible only by crypto infrastructure, add three new dimensions to traditional ad networks and are better for both sides of the market: 1) users get directly rewarded for their attention and 2) projects can verifiably not only pay for reach, acquisition, retention – but also for very specific, granular, verifiable user engagement, tailored to their individual needs. And 3) being able to combine traditional Web2 data on users with their onchain footprint makes a completely new layer of data accessible and massively improves targeting and retargeting. 

As of January 2025, 44M CUBEs (L3’s attestation mechanism) have been minted, creating one of the largest onchain datasets ever created, growing daily. CUBEs contain rich data on blockchain events (e.g., wallet, chain, application, timestamp, quest completion, etc.), are stored on IPFS and are permissionless: anyone can query and access this dataset, building solutions on top of it (and be incentivized to support CUBE growth) – similar to if Google or Meta would make their global user interactions open and permissionless and allow others to build products on top of it. 

Ultimately, Engagement Networks like Layer3 are not only better for users and projects: through more accurate targeting Layer3 will also be drastically more cash-efficient than traditional ad networks. By being more efficient than traditional ad networks, Engagement Networks will steadily grow their share in marketing budgets. By attracting more spend, those networks will attract more users, and by having more users attract more spending, fueling the flywheel described above.

Conclusion

Similar to how Google and Meta became giants by capturing distribution and monetizing attention, Layer3 is establishing itself as the onchain distribution layer, where protocols compete for user engagement and value is efficiently transferred.

At its core, our investment in Layer3 is driven by its ability to capture and monetize onchain attention at scale. The platform has built a defensible flywheel that continuously expands its network effects, while the $L3 token acts as the economic engine driving platform utility and incentivizing participation. Underpinning this is an exceptional team that has consistently executed with speed, efficiency, and a long-term vision. Additionally, the broader market dynamics – including rising competition for user acquisition, the emergence of onchain agents, and the continued migration of economic activity onto crypto rails – only reinforce Layer3’s position as a key infrastructure layer for onchain growth. Finally, we see Layer3 building the leading Engagement Network, dominating an entire new vertical enabled by crypto rails.

Despite all of the above, Layer3 remains fundamentally misunderstood by certain market participants. Some still categorize it as a simple Quest platform, failing to recognize its role as a foundational coordination layer –  one that, much like a Layer 1, connects protocols with users and facilitates scalable economic interactions. With every new integration, Layer3 strengthens its structural advantage, increasing the volume of transactions and deepening its network effects.

Over time, we believe Layer3 will become the dominant marketplace for onchain attention, routing value between users and protocols just as traditional aggregators did for the internet economy – this is why we’ve more than doubled our investment. The market has yet to fully grasp what Layer3 is building, and the opportunity ahead is far greater than most realize.