During the Token2049 conference held in Dubai, the debate on the role of venture capital (VC) companies in the development of the Bitcoin ecosystem ignited passions among builders, investors, and developers.
At the center of the discussion, the growing importance of layer-2 protocols and the financial support necessary to build solid and scalable infrastructures.
Charlie Yechuan Hu, CEO of Bitlayer, a layer-2 protocol based on Bitcoin, has openly defended the involvement of venture capital in the sector.
According to Hu, VCs not only provide essential funds for the start of projects, but also offer strategic resources, institutional connections, and experience, fundamental elements for the growth of the entire ecosystem.
The support of venture capital for Bitcoin: between infrastructure and technological development
Hu emphasized how startups operating on Bitcoin need initial funding to cover operational costs such as servers, cloud services (e.g., AWS), RPC, and more.
“You need developers, you have to open up the entire base of the ecosystem. It doesn’t work simply with a mint and a well-stocked treasury. Real capital is needed.”
In this context, VCs become enablers of growth, allowing the creation of wallets, layer-2 scalability solutions, lending protocols, and staking on Bitcoin.
Hu highlighted how many of these projects, including Bitlayer, are supported by venture capital and, in some cases, already listed on the main exchanges.
Despite the growing support from VCs, not the entire Bitcoin community agrees. Mike Jarmuz, managing partner of Lightning Ventures, expressed a more conservative view.
According to him, the only true layer-2 of Bitcoin is the Lightning Network, as it does not introduce external tokens, does not promise unrealistic returns, and maintains the purity of the original protocol.
“Any project that has a ‘token’ for ‘staking’ and promises an absurd APY on your Bitcoin should be avoided,” stated Jarmuz.
In his opinion, many alternative solutions appear to be useful, but in reality, they do not bring any concrete value to Bitcoin.
However, he acknowledged that some sidechains like Liquid Network or emerging projects like e-cash, federations, or Ark are “at least interesting,” even though they are not widely adopted.
Il Lightning Network continues to prove itself as one of the most promising solutions for Bitcoin scalability.
According to the data from Bitcoin Visuals, the network has reached a cumulative capacity of about 452 million dollars, making transactions instantaneous, almost free, and highly scalable.
Jarmuz reiterated that, unlike other layer-2s, Lightning does not introduce new tokens: “It is Bitcoin. This, for me, is the only true L2, at least for now.”
A broader view: the contribution of VC to the growth of Bitcoin
A concrete example of the positive impact of VC is represented by Kaleidoswap, a decentralized exchange based on Lightning Network. The project started as an open-source initiative and received pre-seed investments from Fulgur Ventures and Bitfinex Ventures.
According to Walter Maffione, lead engineer of the project, the funds have been used to pay the developers and accelerate the development of the protocol, without creating tokens or centralized governance mechanisms.
Hu reiterated that VCs do not limit themselves to financing speculative projects like memecoin or NFTs, but tend to support long-term infrastructural initiatives.
This approach is also shared by Vikash Singh, director of the venture capital company Stillmark, who explained how the selection of layer-2 protocols to invest in is based on rigorous criteria.
That is security, robustness, adoption of non-speculative use cases, and growth of the application level.
Singh also emphasized Stillmark’s preference for the proof-of-work consensus model, considered superior.
However, he opened up to the possibility that alternative mechanisms such as proof-of-stake or Byzantine fault-tolerant consensus may be suitable for Bitcoin sidechains and rollups.
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A balance between innovation and principles
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The debate on the role of venture capital in the Bitcoin ecosystem reflects a broader tension between technological innovation and ideological principles.
On one hand, there are those who fear that the influx of external capital could distort the decentralized philosophy of Bitcoin. On the other hand, there are those who see in VC an opportunity to accelerate development and make Bitcoin more accessible and functional.
In a moment when the global adoption of criptovalute continues to grow, finding a balance between these two poles will be crucial for the future of the protocol.
As demonstrated by the cases of Bitlayer and Kaleidoswap, VCs can be valuable allies, provided that the investments are driven by a long-term vision and a concrete commitment to building solid infrastructures.
While the debate continues, one thing is clear: the development of layer-2 on Bitcoin requires resources, expertise, and vision. In this scenario, venture capital is establishing itself as key players, capable of catalyzing innovation and growth.
While on one hand it is right to keep a high guard against speculative projects, on the other hand it is necessary to recognize the value that VCs can bring to the ecosystem.
In a rapidly evolving world, the contribution of these investors could make the difference between marginal adoption and a global revolution.
