How to direct and allocate attention in the most valuable way.
Interviewee: Brandon Kumar, Co-founder of Layer3
Interview and compilation: Wendy, Chandler, Foresight News
"We have long been overwhelmed by low-quality projects. Crypto projects ultimately serve real consumers, and people are an indispensable part of the entire ecosystem." When talking about how crypto projects can develop sustainably, Brandon Kumar, co-founder of the attention commoditization protocol Layer3, told Foresight News . When explaining the naming of Layer3, he also emphasized: "We think Layer3 is people and community, and hope to highlight the importance of user experience and community building through this naming."
In the current era of information explosion, attention, as a scarce resource, has become an important component of economic activities and an object of competition. In the world of Web3, the commercialization of attention is gradually being explored and becoming a new business model. Layer3 is a pioneer in this field. It aims to build decentralized infrastructure on the chain through user online identity, content consumption and currency incentive layers, and release more than $500 billion in application value behind attention.
Specifically, Layer3 has built a bounty matching platform that can define the user activity of the entire chain and the project party's task incentive token distribution mechanism through a unique three-layer staking + double burning token economic model. The core concept of Layer3 is to aggregate user activities in multiple cross-chain environments and complex dApps applications through on-chain behavior tracking and asset distribution mechanisms to form a unified on-chain identity view. This view can not only help project parties identify truly valuable early users, but also distribute tokens to suitable users more systematically based on on-chain activities, CUBE credentials, social graphs, and task participation. Standards, thereby providing users and project parties with a basic, fair, and efficient ecosystem.
The founding team of Layer3 all have backgrounds in prestigious universities. Dariya Khojasteh, the project's co-founder and CEO, graduated from the University of Southern California, and Brandon Kumar, another co-founder, graduated from George Washington University and previously served as vice president of venture capital firm Accolade Partners. Peter Ng, the project's engineering director, was previously the CTO of Mojito and graduated from Columbia University. In June this year, Layer3 completed a $15 million Series A financing round led by ParaFi and Greenfield Capital, with participation from Electric Capital, Immutable, Lattice, Tioga, LeadBlock, Amber, and others.
On July 24, Layer3 opened the airdrop allocation check. L3 tokens will be allocated according to the user's historical and current activities, based on the number of CUBEs, task completion, cross-chain and exchange transaction volume, etc. On July 30, Layer3 stated on Discord that the Layer3 Foundation has increased token allocations for all eligible addresses and added 1,592 users to the eligibility list. The current user allocation review has been completed and finalized.
Taking advantage of the project TGE, Foresight News had an in-depth exchange with Layer3 co-founder Brandon Kumar to discuss topics such as the concept of attention, how to build a new paradigm for the token economic model, and how to better coordinate ecosystem participants. In the interview, Brandon Kumar emphasized that quality means different things, and meaningful crypto projects need to generate real value. For example, why has Maker (MKR) been around for so long? First, it is the core cornerstone of the industry; second, it has real fundamentals and cash flow behind it.
Foresight News: Please briefly introduce yourself and other core team members of Layer3. What motivated you to found Layer3?
Brandon Kumar: Thank you for your invitation. My name is Brandon Kumar, and I am one of the co-founders of Layer3. I started my career in the investment field and worked at Accolade Partners, a large alternative asset management company that manages billions of dollars in venture capital, growth and M&A strategies. I joined in 2016 as an investment director, mainly responsible for investing in companies with risk, growth and M&A strategies. We are one of the important limited partners of Andreessen Horowitz, and in 2018 they launched their first crypto fund, marking their official entry into the crypto field.
In my previous job, I spent a lot of time meeting with founders, doing due diligence, and thinking about aggregation theory. I saw a lack of a product in the market that could connect protocols looking for on-chain users with consumers looking to find the right protocol. I met my co-founder Dariya through Jay Bhavnani, founder of Rari Capital. At the time, Dariya was building a growth marketing program under the Layer3 brand, aimed at helping DeFi protocols activate their communities through off-chain behavior. We found that our skills were very complementary, with him focusing on product strategy and product marketing, and me focusing on B2B and partnerships. So we decided to combine forces in September 2021, raised a seed round of funding, and have continued to expand our business since then. We are now approaching our third anniversary, have raised over $21 million in funding, have eight-figure protocol revenue, and have a team of 14 people.
Foresight News: Obviously, you have many options for entrepreneurship and can start with different types of projects. Why Layer3? What is the core philosophy and goal of Layer3? Where is the team's current focus?
Brandon Kumar: That's a really good question. First of all, to pursue anything in a market, you need to make sure the problem you're pursuing is big enough and the opportunity is big enough. So why choose the crypto space? I think the crypto market is a very dynamic market and it's fun to explore as a founder. In the next decade, the crypto market will accumulate huge value.
What problem do we want to solve in the industry next? We want to solve a very big problem. If you look back at some of the largest businesses in the 2000s and 2010s, they all followed what is called the Aggregation Theory. Aggregation Theory refers to a business model that has a direct relationship with the end consumer, aggregates the supply side, and provides a distribution channel that improves overall efficiency and user experience. For example, Amazon, Netflix, Spotify, and Facebook are all classic examples of Aggregators because they have direct relationships with consumers and aggregate supply side resources.
In 2020, as a user, I spent a lot of time looking for yield farm protocols in DeFi Summer and trying to find protocols related to my needs and interests, but it was obviously unreasonable to find protocols through Twitter. This made me realize that we can combine these forces to build a platform. If the crypto industry develops as I expect, the industry will grow tenfold or even more in the next decade. Therefore, a mature matching engine is needed to connect builders and consumers. This way, if you are building a purpose protocol, instead of burning funds through airdrops or liquidity mining, you can distribute tokens to the right users at the right time.
Our goal is to improve the experience of our existing user base while helping to expand the market so that more people can find the right protocol more easily. If we succeed in achieving this vision, it will be a huge win for us and all participants. For now, our focus is mainly on creating an extremely user-friendly platform that enables users to enjoy the fun of crypto. Because in the crypto field, the deployment threshold of the protocol is very low and the market is flooded with low-quality projects. Our focus is to curate the best projects in the industry so that users can be exposed to the best projects when exploring the on-chain ecosystem on Layer3, thereby ensuring user loyalty and retention. Through our continuously optimized matching engine and strategy, we hope to provide the greatest value to users and protocols while promoting the healthy development of the entire crypto market.
Foresight News: On your company’s blog, you emphasized that “attention is a scarce resource, and fragmentation is the biggest risk of cryptocurrency.” Can you further explain the meaning and connotation of “monetization of attention”?
Brandon Kumar: We are now in an era where innovation in almost every key vertical is developing rapidly, whether in artificial intelligence or encryption, which has brought about what is called "excess computing power." This enables developers to build a variety of products and services, and content creators can disseminate their content on multiple channels at a large scale, bringing products to consumers significantly faster. If you started a company 20 years ago, you would need to raise a lot of money and incur high operating costs, such as physical servers. Now, these costs have been greatly reduced.
Likewise, in crypto, you can now deploy a smart contract that can attract hundreds of millions of dollars in TVL in a matter of weeks. As barriers to entry are lowered, consumers will eventually be overwhelmed by the sheer volume of things to explore. So what is the most valuable commodity? The most valuable commodity is the consumer's time and attention, especially their behavior on-chain.
If you can somehow profit from controlling user attention, or getting users to do something on the chain, that's a very powerful business model. And this model is not fully reflected in the current market. For example, MeMe tokens reflect the concentration of attention on the chain to some extent. Although their life cycle is short, they also show this trend. Similarly, large Layer2 ecosystems also have this phenomenon, where attention will be concentrated on a specific project and then gradually weaken. Take Forecaster as an example. People used to pay a lot of attention to decentralized social. Now this attention may not have weakened, but it is not growing as fast as before. Our business is mainly to help guide and allocate this attention in the most valuable way.
Foresight News: What are the technical highlights of Layer3? Can you give us a detailed introduction on how these technical highlights work and what they mean to users and projects?
Brandon Kumar: When I first started the company, it was just me and my co-founder, and I was still working at my previous company. We needed to raise money and build a product, so we used a no-code platform like Webflow to raise seed funding. In fact, the complexity of our technology stack and infrastructure has increased by several orders of magnitude compared to when we started the company and now.
The technical architecture of Layer3 has two key parts: value distribution and identity identification. Take Facebook as an example. Their business model is to attract users to spend a lot of time on the social platform. The user's data belongs to Facebook, and then Facebook monetizes this data and sells it to advertisers. Advertisers make a lot of money, and the value mainly belongs to Facebook. In the field of encryption, the protocol has its own tokens, which are mainly used to acquire users on the chain. The treasury of the top 20 crypto projects has $24 billion in local assets, most of which are used to help the team expand the ecosystem. Our protocol design is that users complete specific operations (X) on the chain and receive corresponding rewards (Y), all of which are programmatic. Operation X has two sub-variables: transaction cost and transaction value. The transaction cost depends on which chain the user trades on, for example, the Ethereum mainnet cost is higher and the BNB cost is lower. The transaction value depends on the amount of the transaction. Through a programmatic approach, we can give corresponding rewards based on the user's operations on the chain.
The second technical highlight is identity authentication. When you use the platform on Facebook, the data belongs to Facebook. In our model, after the user completes activation on Layer3, a credential called CUBE (Credential to Unify Blockchain Events) will be generated. Simply put, this is a kind of on-chain session data, but you own it. CUBE is an ERC-721 token minted after the operation is completed. It contains detailed transaction data for each on-chain session and belongs to the user. In addition, users will receive rewards, and the economic benefits are positive for users.
Foresight News: Layer 3 is a buzzword in the crypto world, especially when people are talking about whether Ethereum needs L3, right? In fact, you named the project Layer 3, but why? I mean, where did it come from?
Brandon Kumar: When we first started this project, Ethereum was the core layer as Layer 1. With the emergence of scaling solutions, Layer 2 began to emerge, such as Optimism and Arbitrum. We believe that the most important layer is actually the human layer, that is, the community layer. We want to emphasize that crypto projects ultimately serve real consumers, and people are an indispensable part of the entire ecosystem.
Therefore, the naming of Layer3 reflects this view: the third layer is people and community. We hope that through this naming, we can highlight our emphasis on user experience and community building. Later, as the crypto space developed, the concept of Layer3 became more and more popular, including the emergence of application-specific Layer3 and game Layer3. This also helped our performance in search engine optimization (SEO) to some extent, allowing more people to find us. But more importantly, this name captures the core concept of our project very well, and we are very proud of it.
New paradigm economic model of three-layer pledge + double destruction
Foresight News: How is the token economic model of Layer3 designed? Please explain the token economic model of Layer3 in detail, including the layered staking and double destruction mechanism?
Brandon Kumar: Our vision from the beginning is that when network effects are established, value can be redistributed to both sides of the market in the form of tokens. In traditional markets, companies usually raise a lot of venture capital to subsidize the cost of establishing network effects. For example, Uber operated at a loss in the early days in order to grow, but eventually they needed to increase prices and reduce driver income to make a profit. This model can enhance network effects in the crypto field by redistributing value through tokens.
We decided to introduce tokens only after we achieved clear product-market fit and network effect growth. Fortunately, we reached this goal in about two and a half years, so we decided to launch L3 tokens. In short, when users use tokens, they can get more L3 token rewards. At the same time, they can also get OP by operating on Optimism, or ARB by operating on Arbitrum, plus L3 tokens. This amplifies their earnings opportunities. On the protocol side, if you deploy value through Layer3, our success will be linked to your success, and you will also get corresponding token ownership. It can be understood that if we apply this model to Facebook, Facebook will distribute shares to all users and advertisers instead of just making profits for the platform itself.
In terms of token distribution, Layer3 distributes tokens based on the user's on-chain activity. Whether it is a user with a low wallet balance but frequent transactions, or a user with a high wallet balance but low transaction frequency, rewards will be distributed according to their contribution to the protocol. This approach ensures that each user can get corresponding rewards based on their transaction volume and transaction value, thereby achieving fair distribution.
Fairness is crucial in Layer3. Layer3 ensures fairness through the curation of high-quality projects and precise user matching. Now, we all know that it is too easy to deploy protocols, and in fact we have been overwhelmed by low-quality projects. Users often don’t know where to spend their time and may even have a bad experience as a result. Quality means different things, and we will focus on curating the best projects in the industry to ensure that users are exposed to only the highest quality projects when exploring the on-chain ecosystem. This will not only ensure user loyalty and retention, but also ensure successful service to the final protocol.
The layered staking model closely aligns the interests of token holders and active users of the platform. Layered staking is an innovative model. In any token environment, there are two roles: active users and token holders. Ideally, these two roles are consistent, but in reality, this is not the case. Layered staking has three parts: first, users passively stake and earn returns; second, users stake and actively use the platform, thereby earning additional third-party tokens; and finally, users stake and actively use the platform while earning more L3 tokens. This progressive model from passive to active promotes consistency between the two roles.
The double destruction mechanism is another major feature of ours. I believe that in the long run, only those protocols with real fundamentals and real revenue can succeed in the long run. Fortunately, Layer3 is a profitable business. We plan to establish a destruction mechanism, and the revenue generated by the protocol will be used to destroy tokens, thereby generating deflationary pressure and increasing value for token holders according to the growth of cash flow conditions. I think this is a very strong business.
Foresight News: How does Layer3's token economy achieve system sustainability? Can you explain in detail how Layer3's token economy achieves sustainability by acquiring external value?
Brandon Kumar: Layer3's token economic model is designed to ensure that the token has real fundamentals and revenue, and sustainability is only the product of whether the value is reinvested in the business. In the long run, only those protocols with real fundamentals and real revenue can succeed. Layer3 is a profitable business that creates deflationary pressure by repurchasing and destroying tokens through revenue, thereby benefiting token holders. The role of Layer3 is to pass value to users and protocols. Through token redistribution, network effects are enhanced, and users not only obtain L3 tokens, but also other tokens by operating on different chains, which amplifies their profit opportunities. At the same time, the protocol deploys value through Layer3 to ensure that success is consistent with us and obtains corresponding token ownership. This model ensures that Layer3 can capture external value and achieve the sustainability of tokens through repurchase and destruction mechanisms.
Foresight News: I saw that you mentioned before that you will conduct multiple airdrops. What are the plans for future airdrops? How will you give back and incentivize the community?
Brandon Kumar: We just recently announced the airdrop eligibility checker, and the token will be live soon. The specific airdrop plan is determined based on the user's activity on the Layer3 platform. It takes into account the time a user uses the platform, the number of tasks completed, the credentials earned, the value transferred through our bridge and exchange functions, and the daily activity on the platform. These factors together determine the user's airdrop eligibility. Compared to most airdrops, our allocation has received a lot of positive feedback and expectations. Users are generally satisfied with the allocation results released yesterday. We look forward to seeing the community's reaction after the token is live. Future airdrop plans will continue to be based on these core factors to ensure that active users and early supporters receive the rewards they deserve.
Regarding the listing schedule, we do have plans to list the token, but we cannot announce the specific time yet. The token will be launched soon, and the specific schedule and related details will be officially announced soon. Please pay close attention to the upcoming announcement. We hope that through these arrangements, we can ensure that the token can be launched smoothly and bring more value and incentives to the Layer3 community.
Becoming the Google of Crypto
Foresight News: Let’s talk about the future. Recently, Layer3 completed a $15 million Series A round of financing led by ParaFi and Greenfield Capital. What kind of future do you think they are betting on by investing in Layer3?
Brandon Kumar: That's a really good question. In my opinion, they are betting on a future that can connect billions of dollars of value to users. We have been clear from the beginning that we want to solve an important problem in a large market. Layer3's goal is to become the "Google" in the crypto field, providing an efficient matching engine for users and protocols. If we can successfully execute this vision, it will not only bring huge value to Layer3, but also have a profound impact on the entire industry.
From an investment perspective, ParaFi and Greenfield Capital see tremendous growth potential for Layer3 over the next decade. If history is any guide to the future, this business model tends to be very valuable. While there is still a lot to be achieved, Layer3 does have the potential to become a major player in the crypto world if we can execute this vision correctly.
Foresight News: Can you tell us how this financing will help Layer3 achieve its future goals and plans?
Brandon Kumar: The $15 million in funding will be used primarily in several key areas. First, we plan to expand our team in the Asia-Pacific region, including China, Singapore, Thailand, South Korea, and Japan. This will help us better serve these markets, attract more users and partners, and further advance Layer3's global presence. Second, we will significantly strengthen our engineering team to ensure that we have sufficient resources to develop and launch some very exciting new features. These features will be released gradually in the coming months, including a more intelligent matching engine and a personalized user recommendation system.
Foresight News: What are the main development directions and focuses in the next one to two years?
Brandon Kumar: First, we will focus on more personalized matching. When you use Instagram, you will see content that is highly relevant to your interests, which greatly improves the user experience. In the crypto field, this experience does not exist yet. We perform various operations on the chain, but there is no way to make accurate recommendations based on historical data. Therefore, we are investing a lot of R&D resources to create an engine that can provide highly personalized and accurate matching. The second is to expand and increase the scale of the platform. Layer3 drives a large number of transactions on various Layer2s. In many ways, we are currently "renting" these infrastructures. We hope to have more autonomous infrastructure by further vertically integrating our technology stack. In addition, we are also developing some new features involving asset trading and custody methods, which will be launched in the next few months, and we are very excited about it.
Foresight News: Last question, as you said, you were an investor before and now you are an entrepreneur. What is the difference between the two? How do you feel about it so far?
Brandon Kumar: The biggest difference between being an investor and an entrepreneur is the frequency and nature of decision making. As an investor, I may only make five to ten important decisions in a year, and I spend more time observing and thinking. As an entrepreneur, I have to make five to ten key decisions every day. This rhythm change is an important adjustment for me.
During this entrepreneurial journey, I learned several things: First, it is very important to have a complementary co-founder. My co-founder is very good at product strategy, while I am mainly responsible for business development. Second, the first few hires are very critical. These people will become the core of the team, and their quality and ability will directly affect subsequent recruitment and team culture. Finally, it is very important to maintain a high degree of self-discipline and maintain strict cost control throughout the market cycle. In 2021 and 2022, many companies spent a lot of money during the market boom, but we remained cautious, which enabled us to remain stable during the market downturn and build a counter-cyclical business model.
