Launched in 2022, Layer3 has quickly established itself as a formidable presence in the Web3 ecosystem.

To date, Layer3 success can be quantified through several impressive metrics:

• 1.6 million active users
• 19 million quests completed
• 145 ecosystem partnerships
• 410.49 ETH in fees collected

Layer3 unique gamified marketing strategy has not only captivated individual users but has also drawn the attention of numerous blockchain projects. By offering interactive and educational tasks, Layer3 has created a dynamic environment where users can learn about and interact with various Web3 products, including DeFi protocols, NFTs, and DAOs.

But how did Layer3 manage to achieve such remarkable success in such a short time? The answer lies in its strategic use of gamification, perpetual incentives, and strong ecosystem partnerships.

Let’s dive deeper into the phenomenon behind Layer3 meteoric rise…

Diving into Layer3.xyz

As the Web3 ecosystem grows, the number of users and project owners will only increase, and so also will competition for both users to find suitable projects and project owners to acquire and retain users.

Layer3 is a Web3 project marketing platform that uses a gamified approach to guide users in experiencing Web3 products and to drive traffic to projects. This approach is appealing especially to beginners and it is attractive to Web3 projects that intend to reach that audience.

Layer3 provides a set of protocols that enable token distribution, identity verification and incentive mechanisms across multiple blockchain networks, all governed by a community-driven foundation. Its protocols and products are designed to function across different blockchain networks, thus creating what they call an “omnichain” infrastructure. This approach allows for seamless interactions and integrations with various ecosystems, enhancing the interoperability and utility of the Layer3 platform.

Since its launch, Layer3 has attracted a significant fan base and has guided users towards on-chain interactions in DeFi, NFT, and DAO fields. Users can earn NFTs and Experience Points (XP) as rewards upon task completion, and these NFTs are eligible for trading.

What is Layer3.xyz?

Layer3 is a Web3 marketing platform that connects users with blockchain projects through interactive, gamified tasks known as “Quests”. These tasks help users discover and interact with different Web3 products, including DeFi, NFTs, and DAOs.

Quests range from simple actions like:

• Educational Activities: Quests may include watching educational videos, reading articles, or completing quizzes to learn about different aspects of blockchain technology and specific projects.
• Joining Social Media Channels: Tasks can involve social actions like following a project on Twitter or joining a Discord server to build community engagement and awareness.

To more detailed actions like:

• Staking Tokens: Users are required to stake tokens in a specific protocol to earn rewards.
• Using DeFi Protocols: Quests often include tasks like swapping tokens on decentralized exchanges (DEXes) such as Uniswap or providing liquidity to DeFi pools. This educates users on how to use these protocols and participate in the DeFi ecosystem.
• Holding Tokens and NFTs: Some tasks verify that users hold specific tokens or NFTs in their wallets. For example, holding a certain amount of DAI on the Arbitrum network or possessing a specific NFT like a Bored Ape Yacht Club (BAYC).
• Token Transfers: Users might be asked to transfer tokens between addresses. For instance, transferring 1 ETH to a specified wallet address.
• Participating in Governance Votes: Users engage in governance by voting on proposals within DeFi protocols, helping them understand decentralized governance mechanisms.

Layer3 has two parts: for users and for ecosystems. (image below)

The users part provides a centralized platform where users can access and interact with various blockchain ecosystems. The image below shows what the initial interaction with the application is like for users;

Users can then search and select quests and are rewarded for their activities, which drives continuous engagement.

The ecosystem part supports blockchain projects by leveraging user identities that are already existent on their platform, distribution channels layer3 has partnerships with, and incentive mechanisms to enhance their ecosystems. To make use of Layer3 infrastructure, a form will be filled to collect information about the project. (image below)

What Problem Does Layer3.xyz Solve?

Layer3 addresses several critical challenges in the Web3 and DeFi space:

1. User Engagement and Onboarding:

• Problem: New users often find it difficult to navigate and understand the complexities of blockchain technology and DeFi protocols.
• Solution: Layer3 simplifies user engagement by providing a gamified platform where users can learn and interact with Web3 projects through quests.

These quests are designed to be educational, guiding users through various blockchain tasks in a step-by-step manner, making it easier for beginners to get started​ and know what they will gain at the end

2. Sustainable Incentive Structure:

• Problem: Traditional incentives in blockchain ecosystems are short-lived leading to low user retention and engagement over a long period.
• Solution: Layer3 offers perpetual incentives such as NFTs, XP points, and exclusive rewards for completing tasks. These incentives which are clearly shown in the sidebar are designed to keep users engaged over time, fostering a sense of progression and achievement​

They make use of different levels (like tiers) and a streak to retain users. Some quests will need a specific level to unlock them and that would require consistent app usage to get.

3. Ecosystem Growth and Awareness:

• Problem: New and existing blockchain projects struggle to attract and retain users, as well as build awareness within the broader crypto community.
• Solution: By partnering with various blockchain projects, Layer3 provides a platform where these projects can list quests that promote their features and benefits. This helps projects gain visibility and attract users who are already engaged with the Layer3 platform​.

What is Layer3.xyz Unique Selling Proposition (USP)?

1. Comprehensive Educational Approach:
   (for application users)

• Layer3: Focuses heavily on education through gamified quests that gradually build users’ understanding of Web3 and DeFi protocols. Each quest is designed to teach users specific skills and knowledge, making it easier for beginners to get started and advance their understanding.
• Example: Layer3 provides tasks like staking tokens, using DeFi protocols, and participating in governance votes, which are not just tasks but also educational experiences that help users learn by doing​
• Other Platforms: Many platforms reward users for their contributions and engagement but often lack a structured educational pathway like Layer3 does.

2. Integration and Ecosystem Support:
(for application users and infrastructure users)

• Layer3: Offers strong support for integrating various blockchain projects, allowing them to create tailored quests that promote their unique features and benefits. This integration helps projects gain visibility and user engagement.
• Example: Partner activities on Layer3 allow blockchain projects to design specific quests that highlight their features, such as staking tokens in a new DeFi protocol or using a particular dApp​ (Source 1)​​ (Source 2)​.
• Other Platforms: Tend to focus on community-building activities without the deep integration with project functionalities that Layer3 offers.

3. Advanced Customization and REST Integration:
(for infrastructure users)

• Layer3: Allows for advanced customization of tasks and quests through REST API integration, enabling projects to design specific and tailored activities for their users.
• Example: Custom tasks might involve signing up for a newsletter or completing specific actions within an integrated application, providing flexibility and adaptability for different project needs​ (Source 1)​​ (Source 2)​.
• Other Platforms: Tend to focus more on predefined activities and lack the extensive customization options offered by Layer3.

Layer3.xyz Product Features

Currently Live Features

Layer3 currently offers the following features;

• Quests
  Layer3’s Quests are interactive tasks designed to engage users with various Web3 projects and applications. Example of a list of quests (image below)

These tasks are gamified experiences that incentivize users to perform certain actions, such as staking tokens, swapping cryptocurrencies, providing liquidity, or participating in governance votes​. Example of taking actions in a quest (image below)

The Quests are structured in a way that educates users about the intricacies of DeFi, NFTs, and other blockchain technologies while rewarding them for their participation. And when users are done, they earn rewards (image below)

• NFT Rewards
  As users complete Quests, they earn NFTs (Non-Fungible Tokens) from some projects as rewards.

These NFTs serve as both collectibles and proof of achievement, adding a layer of gamification and providing tangible incentives for users. Total NFTs collected is shown in the users’ profile (image below)

• Experience Points (XP)
  Users earn Experience Points (XP) for completing tasks and participating in activities on the platform. The amount of XP to be gained from a Quest is displayed on the Quest (image below)

XP points contribute to a user’s overall level and reputation within the Layer3 community. Higher levels and more XP can unlock additional features, exclusive Quests, and other benefits, fostering a sense of progression and accomplishment​.

Users can track their experience points in their profile (image below)

• Trade
  Users can trade tokens on the platform. They can access the page by clicking on “Trade” in the top navigation bar (image below)

• Bridge
  Users can transfer assets or tokens across Web3 platforms on the application. (image below)

Layer3.xyz Best Feature

The most beneficial feature of Layer3 is the Quests, which adopt a step-by-step approach to guide users through tasks while ensuring they learn about Web3 products. This method integrates educational content within the tasks, providing long-term benefits by helping users understand the purpose and functionality of the projects they are engaging with, rather than just completing tasks without context.

For example, a Quest might begin with an introduction to the project, explaining its goals and features, before guiding users to perform related activities like staking tokens or using a DeFi protocol.

Here’s an example of a Quest that provided detailed information about the project before users performed any actual activity:

This educational approach ensures that users gain valuable knowledge and skills, fostering a more informed and engaged community.

Layer3.xyz UI/UX Analysis

User Experience and Journey

• Home
  When users visit the Layer3 platform, they are presented with a page that briefly talks about the two use cases of their product (users and ecosystem)

• Below that section, users are given information about their features

Other sections of the home page; Investors and Contact details

• User Application
  The application shows featured projects that users can easily check out and by the right, a summary of the users’ progress in a floating right navigation panel (image below)

• Below that section is a list of new and trending projects/communities users can participate or get involved in and then a section for the list of daily or weekly streaks users can engage in. A continuation of the right navigation shows the progress of the user and their streaks. (image below)

• Below that we have the daily offers section and special offers. The page is a continuous flow of different sections that unfold as the user keeps scrolling down (image below)

• Quests
  When the user has selected a quest they intend to participate in, a page is displayed that gives the information of the quest and the tasks to be completed before the reward is obtained (image below)

• As they perform their task, the checklist on the left tracks their progress (image above)
• When they are done with the checklist, they will receive their reward which can be viewed in their profile that can be accessed at the top right corner of the top navigation (image below)

• Profile
  Users can view their progress in their profile, connect their social media handles, and access settings of the application via the “Edit Profile” button.

• In the Settings part of the profile, users can change their display picture, add their personal website, import DNS, connect one (or more) wallet, and connect their social media accounts (image below)

• Trade
  Users can trade tokens on the platform. They can access the page by clicking on “Trade” in the top navigation bar (image below)

• Bridge
  Users can transfer assets or tokens across Web3 platforms on the application. (image below)

• Leaderboard
  Users can view the leaderboard of users on the platform. They can access the page by clicking on More and then Leaderboard (image below)

• The leaderboard shows the ranking of all users in the Layer3 application and their ranking. It also shows the user their individual rank (image below)

• Shop
  Users can view the shop on the platform. They can access the page by clicking on More and then Leaderboard (image below)

• The shop allows users to purchase boosters, discounts, and other features that can aid them when performing tasks to either gain more experience point or pay lesser fees when trading (image below)

• Ecosystem
  From the Home page, users can access the Ecosystem section
• Users interested in the infrastructure of the application can click on “Curate a Space” (image below) and proceed to fill a form about information on their projects.

Layer3.xyz business model analysis

Revenue Generation Model

Layer3 generates revenue through;

• Partnerships with blockchain projects:
  Layer3 collaborates with a variety of blockchain projects which pay to have their quests featured. These partnerships drive engagement by introducing users to new projects and encouraging them to participate in activities such as staking, using DeFi protocols, and joining governance votes.
  Example include OKX, adidas, and others
• Partnerships with infrastructure providers:
  They can also generate revenue by partnering with infrastructure providers and get a percentage of their processes.
  Layer3 partners with providers like Socket (https://socket.tech/) to handle the trade and bridge feature on the application

• Sponsored Quests and activities:
  Projects pay for sponsored quests, which could include educational content, token staking, and participation in DeFi protocols. The fees for these services depend on the reach and engagement metrics that Layer3 can deliver.

Layer3.xyz Monetization Framework

1. Partnership Fees

• Layer3: The primary revenue stream for Layer3 comes from fees charged to blockchain projects and protocols for listing their quests and tasks on the platform. These fees can vary based on the complexity and scope of the campaigns. Projects pay to utilize Layer3’s infrastructure to engage users and increase awareness and participation in their ecosystems​
• Competitors: Similar platforms like Zealy, Galxe, and TaskOn also charge fees for listing projects and tasks. They monetize through partnerships and sponsored activities that aim to drive user engagement and adoption.

2. Sponsored Quests and Activities

• Layer3: Generates additional revenue from sponsored quests that are designed to educate users and drive engagement with specific blockchain projects. These sponsored activities include staking tokens, participating in governance votes, and using DeFi protocols.
• Competitors: Other platforms also leverage sponsored activities as a monetization strategy, often incorporating educational content to enhance user engagement. For example, Galxe offers campaigns that involve completing tasks across multiple blockchain projects to earn rewards, while TaskOn provides a similar model focusing on user task completion and reward distribution.

3. NFT Sales and Marketplace Fees

• Layer3: Collaborates with blockchain projects to create and distribute NFTs as part of their quests. Revenue is generated through the sale of these NFTs or through transaction fees in the marketplace where these NFTs are traded.
• Competitors: Galxe also integrates NFTs as part of their user engagement strategy, offering NFTs as rewards for completing tasks. Transaction fees from NFT sales and trades form a part of their revenue model as well.

Source: (ForWebThree)​​ (OKX)​

Layer3.xyz Revenue Estimates

Users and Partners Data:

Number of Unique Users: 1,617,118 (source)

• This indicates a substantial user base actively engaging with Layer3’s platform.
• 30 daily new users (source)
• 900 new users monthly

Total Cube Claims: 19,807,411 (source)

• Represents the number of tasks or activities completed by users to claim rewards.
• 10,000 daily unique claimers
• 300,000 cube claims monthly

Transactions to CUBE contract: 5,476,897 (source)

• Indicates the number of interactions or transactions related to claiming rewards on Layer3’s platform.

Total gas spent on claims: 125.07 ETH (source)

• Gas fees incurred by users while claiming rewards, which goes to the ethereum ecosystem

Total fees collected: 410.49 ETH (source)

• Direct revenue from gas fees collected during the process of claiming rewards. This revenue is generated from users utilizing the platform’s functionalities.

Partnership Fees:

• With 145 ecosystems/partnerships (source), Layer3 likely charges fees for these partnerships. These fees could vary based on the level of exposure and engagement provided to partner projects.
• Let’s estimate $10,000 per partner

Revenue from Users

Layer3’s revenue from user engagement can be derived from the fees collected from users. Given the provided data:

• Total Fees Collected: 410.49 ETH (assumed over a longer period)
• Total Cube Claims: 19,807,411
• Monthly Cube Claims: 300,000

First, we need to estimate the average fee per cube claim:

• Average fee per cube claim = Total fees collected/Total cube claims
• Average fee per cube claim = 0.0000207 ETH/Claim

Next, calculate the monthly revenue from cube claims:

• Month Revenue from Users = claims x average fee per cube claim
• Monthly Revenue = 6.21 ETH/Month

Convert ETH to USD (assuming 1 ETH = $1,900):

• Monthly Revenue from Users (USD) = 6.21 x 1900
• Monthly Revenue from Users (USD) = 11,799 USD/month

Revenue from Partnerships

Layer3 also generates revenue from partnerships. Given the previous assumption of $10,000 per partner annually:

• Number of Ecosystems/Partners: 145
• Annual Revenue per Partner: $10,000

First, calculate the total annual revenue from partnerships:

• Annual Revenue from Partners = 145 partners x 10,000 USD
• Annual Revenue from Partners = 1,450,000 USD/year

Next, convert this to a monthly figure:

• Monthly Revenue from Partners = 1,450,000/12
• Monthly Revenue from Partners = 120,833 USD/month

Summary of Revenue Prediction:

• Monthly Revenue from Users: $11,799
• Monthly Revenue from Partnerships: $120,833
• Total Monthly Revenue: $132,632

Layer3.xyz user incentives and acquisition channels

1. Social Media Channels:

• Twitter and Discord: Layer3 actively engages with the crypto community on Twitter and Discord. By sharing updates and participating in discussions (image below), they attract new users interested in Web3.
• They can also run advertisement campaigns on Twitter to reach a wider audience.

2. Content Marketing and SEO:

• Content Marketing: By producing SEO-optimised educational content to help users understand Web3, Layer3 attracts organic followers from search engines.

• For example, when a user searches a term that’s in the blog in an attempt to learn more about the topic, Layer3 blog shows up (image below)

3. Partnerships with Blockchain Projects:

• Collaborations with Emerging Projects: Layer3 partners with new and promising blockchain projects to create quests that drive traffic and user engagement to these projects. This mutual promotion helps both Layer3 and the partner projects gain visibility. (image below)

4. Community Building:

• Discord and Community Forums: Layer3 maintains active communities on platforms like Discord where users can interact, share experiences, and help each other. Community engagement drives retention and attracts new users through word-of-mouth.

Layer3.xyz User Acquisition and Retention Strategy

Layer3 attracts new users and then retains them through the following;

1. Gamification and Quests

• Gamified Quests: Layer3 attracts users through engaging gamified quests. These quests often require users to perform specific tasks such as staking tokens, using DeFi protocols, and participating in governance votes.
• Once new users come into the platform, they are presented with easy quests to partake in and get started (image below)

• Ongoing Challenges and Rewards: To keep users engaged, Layer3 offers continuous challenges and quests that reward users with XP points, NFTs, and other incentives.

Also, they provide a way for users to track their XP points (image below)

This creates a sense of progression and achievement, encouraging users to return to the platform regularly.

• GM Streak: There is also the usage of “GM Streak” that users need to activate daily to ensure it doesn’t return to zero (image below)

• This ensures users come back every day to maintain their streak

2. Educational Content

• Integration of Educational Materials: Layer3 attracts beginners by integrating educational content within its quests. This not only helps users understand the tasks they are performing but also educates them about the broader Web3 ecosystem.

• This educational approach lowers the entry barrier for new users who are curious about blockchain technology but lack the knowledge to get started.
• Long-Term Learning: By providing value through education, Layer3 retains users who are interested in continuously learning about new projects and technologies. Users are more likely to stay engaged if they feel they are gaining valuable knowledge alongside rewards.

3. Community Building and Social Integration

• Social Media Engagement: Tasks often involve social actions such as following a project on Twitter, joining a Discord server, or sharing content on social media.

• This not only builds community but also spreads awareness, attracting new users through social channels.
• Community Involvement: Layer3 fosters a sense of community by encouraging users to interact with each other and with the projects they support. Engaging with a community of like-minded individuals can significantly enhance user retention.

4. Partnerships and Collaborations

• Strategic Partnerships: Layer3 partners with well-known blockchain projects and platforms to offer exclusive quests and rewards.

• These partnerships attract users who are interested in exploring these specific projects, driving initial engagement.
• Ongoing Collaborations: Regularly introducing new partnerships and exclusive quests keeps the content fresh and exciting for users, encouraging them to stay active on the platform to access new opportunities and rewards.

5. Incentives and Rewards

• Attractive Rewards: By offering valuable rewards such as NFTs, tokens, and XP points, Layer3 attracts users who are motivated by the potential to earn while learning and participating in the Web3 ecosystem.
• Continuous Incentives: Layer3 ensures that there are always new incentives available for users, whether through ongoing quests, special events, or partnership activities. Continuous rewards keep users coming back for more.

How to earn on Layer3.xyz?

Steps to Earn on Layer3

Reward from Quests

• When a user selects a quest to perform, there are rewards attached to it (image below)

• Together with experience points which are given by Layer3, Rewards can be issued by the owners of the project and can be any of the following;
• Experience Points (XP):
  When users earn experience points, it will be used to increase their level (image below) and leaderboard ranking. It will also unlock new Quests and platform perks.

• Achievements and Chests:
  These are special badges on a users profile that can unlock new opportunities and chests (which can contain both XP and NFTs)

• NFTs:
  The platform can mint ERC-1155 tokens (the standard for Ethereum-based NFTs), and then send them to the user when they complete a quest (image below)

• Users can then trade these NFTs on platforms like OpenSea (https://opensea.io/) for a fee (image below)

• CUBEs:
  As a Credential to Unify Blockchain Events, CUBEs are tokens minted by completing Quests (image below)

• Users can then trade these NFTs on platforms like OpenSea (https://opensea.io/) for a fee (image below)

• Tokens:
  Projects can choose to give out their native tokens, as a form of reward for completing quests (image below)

• Users can also receive ETH, USDC, and other tokens for certain Quests (image below)

How much can you earn on Layer3.xyz?

The earnings potential varies based on the complexity and rewards of each Quest, with some offering more lucrative rewards than others.

Cost to Participate

• Free Quests: Many quests are designed to be accessible without any upfront costs. These help users get started and engage with the platform without financial barriers.
• Paid Quests: Some quests may require users to invest in minting or purchasing tokens or NFTs. Costs can range up to $10 or more, depending on the task’s requirements like purchasing a token to hold.

Potential Rewards

Daily, users can rack up experience points worth $10 by participating in free quests but would need to have higher experience levels to access more lucrative rewards.

Staking a significant amount of tokens or purchasing a unique NFT could potentially yield rewards worth up to $1000 or more, depending on the future value of the tokens or the price at which an NFT is sold.

The higher the potential returns of a reward, the higher the level of experience needed to unlock that quest. This approach ensures users stay on the platform to increase their experience levels and leaderboard rankings.

Below are more details on potential returns:

• Token Rewards: Users can earn tokens which may increase in value over time. The potential earnings from these tokens can vary widely depending on market conditions and the success of the associated project.
• NFT Rewards: Some quests offer NFTs as rewards. The value of these NFTs can fluctuate based on demand and rarity. Users might be able to sell these NFTs for significant amounts if they become highly sought after.
• Cube and XP Points: Completing quests often rewards users with Cubes and XP points, which can be used to showcase achievements and participate in exclusive events that bring high returns.

Example of Quests

The cost of a quest usually depends on the complexity and rewards attached to it. Examples below:

• Free quests:
  These are quests that do not require any form of financial deposits (in crypto or fiat) and are usually a list of actionable items to be performed. Example below

• The actions listed in the image above can be performed without transferring crypto to any wallet and the reward claimed
• Cost-dependent quests:
  These quests would require you to mint or make a transfer of crypto as a task to be performed before you can claim the reward. Example below

• The task “Hold MNT” would require the user to have MNT in their wallet which might have to be purchased.

Summary

Layer3’s gamified approach simplifies user engagement with Web3 projects, making it easy for beginners to interact with projects. This user-friendly design not only attracts new users but also incentivizes new blockchain projects to list on the platform that wants to be seen by these frequent visitors of the platform.

This strategy is similar to the model used by advertising companies in Web2, which leverage high user traffic to attract businesses. As users benefit from the platform, whether through education or rewards, the ecosystem grows, creating a self-sustaining cycle that attracts both novice and experienced users, ensuring continuous engagement and growth for Layer3 and its partners​.

Links and References

• https://layer3.xyz/
• Gate.io: What is Layer3?
• Thirdweb: Layer3 Powers Web3 Adoption
• https://app.layer3.xyz/blog/unique-ways-to-retain-and-engage-your-web3-community
• https://app.layer3.xyz/blog/reintroducing-layer3
• https://help.layer3.xyz/onboarding/for-users/rewards-on-layer3
• https://www.bitdegree.org/crypto/layer3-review
• https://help.layer3.xyz/onboarding/for-users/frequently-asked-questions
• https://docs.layer3.xyz/docs/journeys