Source: Cointelegraph
Original: “Bitcoin (BTC) Developers Defend the Role of Venture Capital in Layer-2 Growth”
Despite some opposition within the community, developers speaking at the Token2049 conference in Dubai stated that venture capital firms remain crucial for the infrastructure development of the Bitcoin ecosystem.
Charlie Yechuan Hu, CEO of the Bitcoin layer-2 protocol Bitlayer, shared his views on venture capital (VC) firms in the Bitcoin (BTC) ecosystem.
Hu told Cointelegraph that he has a positive attitude towards many VC firms in the field, as these institutions provide critical support for early projects that need capital to build infrastructure.
"You need developers, you need to build the entire ecosystem foundation, and every aspect needs resources," Hu emphasized. "You need to pay for cloud services, like AWS or RPCs, as well as all server costs […] Therefore, we must have venture capital involved."
Hu questioned the traditional Bitcoin believers' opposition to external capital, pointing out, "It's hard to say, let's do fair minting and then have a very successful, healthy fund while also paying all these development costs." "In fact, this model is not feasible," he stated.
Not everyone in the industry shares the same view. Mike Jarmuz, managing partner of the Bitcoin venture capital firm Lightning Ventures, told Cointelegraph that the Lightning Network is the only layer-2 network his company invests in and is interested in.
He made it clear, "Any project that has 'tokens', allows 'staking', and derives some ridiculous APY interest from Bitcoin should be avoided."
Jarmuz emphasized that, in contrast, the Lightning Network is rapidly evolving, enabling Bitcoin transactions to be processed instantly, with almost zero fees and high scalability. According to data from Bitcoin Visuals, at the time of writing, the cumulative capacity of the Lightning Network across all channels has reached approximately $452 million. He added:
"There are no 'tokens' when using the Lightning Network. It is Bitcoin. For me, this is the only truly layer-2 network, at least for now."
Jarmuz stated that projects that do not meet his standards are merely "disguised as useful" and contribute nothing to Bitcoin. He claimed that sidechains like Liquid Network and newer protocols, such as electronic cash, consortium chains, or Ark "are not widely used," but "at least they are interesting."
He acknowledged that these projects "do not involve staking tokens or promise returns," while those with these characteristics "are just waiting for a rug pull and problems to arise."
"We do not invest in that space," he added.
According to Hu, venture capital brings liquidity, resources, and experience to startups while "opening up various institutional investment ideas and connections." He stated that these are also important supplements to Bitlayer's resources, noting, "If these people did not invest in us, we would not have these resources."
He also argued that venture capital tends to support long-term infrastructure projects rather than speculative projects like meme coins or non-fungible tokens.
Walter Maffione, chief engineer of the decentralized exchange (DEX) Kaleidoswap based on the Lightning Network, shared a similar experience with Cointelegraph, stating that the protocol was initially an open-source project that received seed funding from Fulgur Ventures and Bitfinex Ventures.
"These funds were used to pay open-source developers and accelerate protocol development, not to create tokens or gain governance rights," he said.
Hu claimed that venture capital has made significant contributions to the development of layer-2 scaling solutions, wallets, Bitcoin lending, and staking protocols. He added:
"They have all received venture capital support, including us. Some of these have been listed on top exchanges."
Vikash Singh, head of the Bitcoin venture capital firm Stillmark, told Cointelegraph that when choosing to invest in Bitcoin layer-2 protocols, they consider proven security and robustness, the popularity and adoption of non-speculative use cases, and growth at the application layer. Like Jarmuz, he stated that Stillmark believes proof of work is the optimal consensus model.
However, unlike Jarmuz, Singh stated that proof of stake or Byzantine fault tolerance consensus "may be applicable to Bitcoin sidechains and rollup solutions."
Related: Bitcoin (BTC) is expected to see a price surge to $150,000 as the US and China agree to cut tariffs.
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