Financial backer Franklin Templeton, who launched a Bitcoin exchange-traded fund in January, is investing in the broader ecosystem of the original cryptocurrency token. On Tuesday, a Bitcoin layer 2 project known as Bitlayer Labs announced it raised $11 million in a Series A funding round led by Franklin Templeton along with ABCDE and Framework Ventures.
Layer 2 refers to a network that sits on top of a base layer, such as Bitcoin or Ethereum, and provides a faster and cheaper way to process transactions by compiling them into batches and recording them periodically on the primary blockchain.
The latest round brings Bitlayer’s total funding to $16 million. Other investors include Stake Capital Group, WAGMI Ventures, Flow Traders, GSR Ventures, and FalconX.
Bitlayer is the first Bitcoin infrastructure project to receive investment from an ETF-licensed institution. The partnership with Franklin Templeton highlights the “growing interest and momentum” from institutions to tackle the technical challenges Bitcoin faces when it comes to scaling, the company said.
As for Franklin Templeton’s decision to invest in Bitcoin, Bitlayer Labs co-founder Charlie Hu told Fortune that it’s because the financial giant wants to fund solutions that can lead to yield-generating opportunities for currency holders. “Without a layer 2 infrastructure, there’s no yield-generating opportunity for Bitcoin in your cold storage,” he said. For example, Macaron, a decentralized exchange built on Bitlayer, promises “comprehensive yield-generating plans.”
‘History in the Bitcoin world’?
Bitcoin, the original blockchain, was built as a decentralized digital currency and a long-term hedge against inflation. In contrast, Ethereum was designed as a platform that enabled smart contracts and decentralized applications. Evidence of this can be seen in comparative network activity. According to DeFiLlama data, Bitlayer is the top-ranked Bitcoin layer 2 by total locked value with $404 million stored on-chain. However, in comparison, its Ethereum counterpart, Arbitrum One, has around $18 billion.
The short answer is that Ethereum’s higher throughput and Turing completeness (a term in computability theory that describes a system that can solve any computational problem) means that complex applications can be built more easily.
But Bitlayer wants to change that. Its main goal is to address Bitcoin’s balance between security and completeness through cryptographic innovations and blockchain protocol engineering.
The story continues
Bitlayer is the first layer-2 solution on the Bitcoin virtual machine, or BitVM. BitVM extends the functionality of Bitcoin without changing the underlying network. Think of it as a computing paradigm that expresses Bitcoin’s smart contracts and “requires no changes to the network’s consensus rules.” It enables a “free market” of layer-2s to be built on top of Bitcoin.
Bitlayer aims to scale Bitcoin and “inherit its security, providing users with a high-throughput, low-cost transaction experience,” the company said in a statement. Hu said in a statement that he wants to “make history in the Bitcoin world.”
The funds announced today will be used to support the number of protocols being built within the ecosystem. The company’s development team continues its work on building Mainnet-V2, a Bitcoin-specific aggregation.
“We believe Bitlayer’s unique approach and technology has the potential to unlock new use cases and opportunities for Bitcoin, and we look forward to exploring collaboration opportunities with our Bitcoin-focused financial products,” Kevin Farrelly, managing director of Franklin Templeton Digital Assets, said in a statement.
Launched by Franklin Templeton, a historic firm dating back to 1947, the Bitcoin ETF currently manages $312 million in assets.
This story was first published on Fortune.com