Why do blockchain tech and Layer 0 attract the eyes of investors?

Venture capitalists are making a big move on crypto, totally unfazed by the long-running bear market. In recent years, blockchain has become a disruptive force in many industries. It has brought substantial competitive advantages and development prospects for the enterprises that were the first to use it.

With the hope of catching that ride “to the moon,” investors and enterprises are now pouring billions of dollars into crypto projects such as blockchain-based apps and platforms. According to data from Pitchbook, investment in blockchain projects totaled $10 billion globally in the first quarter of this year, the largest quarterly sum ever and more than double the level seen in the same period a year ago.

Such projects, which can range from crypto and NFT exchanges to decentralized finance (DeFi) applications and token issuers, are commonly known as protocols in relation to the rules embedded in their computer code.

We see a lot of VC investment into many protocols because they all believe, as we do, that some of these protocols are the infrastructure of the future. However, the moats between leading blockchains such as Bitcoin, Ethereum, Solana, and others are forcing investors and users to pick which one to use over the other.

In contradiction to the mantra “one chain to rule them all,” many enthusiasts are now starting to support the idea that the blockchain industry will consist of many different networks seamlessly communicating with each other, similar to how Android users can now make FaceTime calls.

In March, major venture capital firms and investors, including Sequoia, FTX, Coinbase, and Paypal, co-led a multi-million dollar investment in a Canada-based company developing a Layer 0 protocol that aims to connect decentralized applications across multiple blockchains.

For context, Layer 1 blockchain, also known as a smart contract platform, is the base layer for a crypto ecosystem. For instance, Ethereum is a Layer 1 blockchain that has Layer 2 projects built on top of it, including NFT, DeFi, and Web3 projects.

Smart contract platforms compete in three key areas: scalability, security, and decentralization. It is very difficult to have all three of these areas so the use cases that enterprises could do are very limited.

While Layer 1 protocols have limitations, Layer 0s fix them. Not only do Layer 0s allow for projects to be built on top of them, but they also address interoperability between these Layer 1 projects. Layer 0s allow seamless communication between blockchains from the grassroots.

Layer 0 protocols have almost unlimited use cases, whether that is data validation, digital currency wrapping, or building blockchains. There are a lot of opportunities not just for the investors but anyone to engage in this new era of blockchain tech as it touches a wide range of industries. Solutions can also be created that support commercial transactions, the issuance and trading of securities, and cross-border payments. They can also build services like gaming, NFTs, media apps, DeFi apps with trading, and marketplaces across multiple blockchains.

Layer 0s allow enterprises to transact data or finances from one blockchain to different blockchains, communicate with other enterprises connected to the same protocol, and interact and create projects with them within the infrastructure itself.

Interoperability is now being highlighted in all the infrastructure projects, and this is something that will become more mainstream in the industry in the coming years. It is just a matter of understanding how blockchain technology works and what can it contribute to the growth of businesses. We believe blockchain technology has the potential to change nearly every facet of our lives, far beyond crypto’s impact on our financial portfolios.