Funding Layer 2 - The Daily Gwei #453
Billions and billions and billions.
Yesterday, Immutable - creators of leading NFT scalability solution Immutable X - announced that they had completed a monster Series C funding round raising $200 million on a $2.5 billion valuation. Of course, this isn’t the only big funding round that has been announced recently with many other scalability projects being valued at over $1 billion after also raising 9 figures.
I’ve been saying for a while that I don’t think other smart contract blockchains are competing with Ethereum layer 1 - they are competing with Ethereum’s layer 2 ecosystem. This is because Ethereum is taking the modular approach to scalability where execution (aka the heavy lifting of transactions) is pushed to layer 2 and layer 1 is reserved for settlement & data availability. Thus, every smart contract platform that’s taking the “monolothic” approach to scalability - aka trying to do everything at layer 1 - is competing only with Ethereum’s layer 2 ecosystem.
Now, this competition is going to be extremely fierce and there will be tens of billions that is collectively thrown around in order to win this battle (or at least become a dominant player). This is why we’re seeing so much money thrown at layer 2’s - investors are waking up to the fact that the scarcest resource in crypto is blockspace and adding more blockspace in a sustainable, secure and decentralized way is a long-term game that really only the Ethereum layer 2 ecosystem knows how to play properly. The blockchains that are scaling execution at layer 1 are taking shortcuts, sacrificing decentralization/security, and basically taking the long-way round to accepting that the modular approach is the only one that makes any sense.
Of course, all of this money being raised by these teams is going to be used to attract developer talent, users and liquidity which are the lifeblood of any on-chain ecosystem. And because developers are already very scarce in this industry, this money is much-needed to attract the best and brightest people to the layer 2 ecosystem - from both web2 and web3 worlds. Users will then follow the developers since they will be the ones using the apps that get developed and the users will bring liquidity with them - but not without some incentives to bootstrap it (this is where liquidity mining comes in).
Anyway, I expect to see many more of these mega-rounds happen into the future for layer 2’s & other scalability projects and I expect their tokens to be worth many billions once they’re released. I just hope that all of this money gets used wisely and isn’t wasted for short-term growth that fades away into nothing - we’ve already seen this play out way too many times in this ecosystem.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.