Layer3 Gains Traction Amid Blockchain Ecosystems

Layer3, a blockchain application actively used in Arbitrum, Base, and Optimism networks, is leading the charge in user engagement by garnering grants from cryptocurrency foundations and offering token incentives. Data released in June shows impressive global participation, with users from over 120 countries generating 120 million on-chain activities. Approximately 4.5 million wallets utilize Layer3 services, with more than 500 protocols onboarded into its ecosystem, currently operating across 31 chains.

Contrary to the prevailing notion that cryptocurrency applications struggle with mainstream adoption, Layer3 is showing promising user data. According to a report by Decentralized.co, Layer3 has the potential to overcome the challenging task of customer reach faced by traditional Web3 projects.

## Global Blockchain Era Beckons: Demand for Scalable Platforms Increases

Before the internet era, one of the toughest hurdles for product developers was reaching customers. Consumer goods were confined to offline stores, naturally limiting their customer base. The advent of the internet changed this by creating a foundation for global demand aggregation, facilitating the rise of giants like Google, Netflix, Amazon, and Meta. These networks follow the principles of Aggregation Theory, which analyzes supply chains based on three pillars: suppliers, distributors, and consumers.

In traditional networks, suppliers are entities that need network distribution, such as Google and Meta’s advertisers, Amazon’s retailers, and Netflix’s content creators. Distributors are channels through which these supplies reach the end consumers, while consumers are the final users forming the demand side of the network.

Within the cryptocurrency ecosystem, suppliers include Layer1 and Layer2 blockchains as well as decentralized applications (dApps). These entities require efficient distribution channels to reach consumers. Distributors here are channels like wallets and exchanges, while consumers encompass developers, institutions, and general participants needing on-chain networks or dApps.

Meanwhile, the fragmentation of supply channels within the blockchain market is accelerating. Hundreds of networks and thousands of dApps are dispersed across these networks. Unlike traditional markets, the blockchain ecosystem lacks centralized distributors like Google, Facebook, or Amazon.

## Layer3 Aims to Be the “Google of Blockchain”: A New Channel for Discovering Web3 Projects

Layer3 aims to position itself as the ‘distributor’ in the blockchain ecosystem. It seeks to onboard various ecosystems, guiding blockchain users to discover new apps or revisit frequently used services. In the Web3 ecosystem, cryptocurrencies have been utilized as customer acquisition costs (CAC), with tokens distributed to draw users into the ecosystem.

Initially, ICOs (Initial Coin Offerings) dominated, followed by airdrops, mining via liquidity provision, and other methods, which have since shown inefficiencies. Platforms like Layer3 use methods like ‘questing,’ where users participate in ecosystem activities and receive token rewards.

Users searching for new products visit questing platforms to discover new projects, leading these projects to onboard onto the platform for greater user influx. The more users and projects onboard, the higher the utility provided to both parties.

Layer3 has focused on curating meaningful projects with significant visions in the Web3 ecosystem to drive initial user uptake. By onboarding these projects, Layer3 can offer services that deliver tangible utility to users. This strategy has helped Layer3 garner high user traffic in ecosystems like Arbitrum, Base, and Optimism. The Layer3 team reports, “Currently, around 90 protocols join Layer3 each month, highlighting its critical role within the protocol creator ecosystem.”

## Gamification and Performance Models Boost User Acquisition

Layer3’s success in user acquisition is attributed to testing various performance models, incorporating gamification strategies to motivate users intrinsically. Yu-kai Chou, who established the Octalysis Framework, emphasized that human behavior could be motivated through eight key factors within the gamification process.

Layer3 stimulates ‘sense of mission’ by offering protocol and project ownership, provides ‘achievement’ through XP systems and reward hubs, and promotes ‘creativity and feedback’ by allowing users to utilize earned gems in the platform store. Additionally, Layer3 has fostered a competitive environment through leaderboards and time attacks to increase natural user influx. The development team stated, “Implementing diverse gamification strategies within the platform led to consistent user acquisition over the past two and a half years.”

## Sustainable Platform Based on On-Chain Activities

Global IT giants like Google, Facebook, and Amazon have built data silos by attracting users to their platforms, leveraging user data to refine their business models. In contrast, Layer3 emphasizes user ownership of data, where users own their data through ERC-721-based tokens called CUBEs. These tokens ensure that on-chain data generated on the platform remains permanently user-owned.

Layer3 differentiates itself from traditional platforms by lacking exclusive rights over data usage. Instead, it focuses its business model on data curation, analyzing on-chain transaction data to drive long-term user engagement and curate suitable products. This positions Layer3 to function as an on-chain search engine.

The Layer3 team aims to develop the platform as a channel that easily attracts new users for early-stage projects. The industry is keenly observing whether the development team can maintain a balance between continuous user influx and traffic rewards through token incentives, ensuring sustainability.