CZ Ignites Debate: AI on Layer 1 or 2 Blockchains?

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L1 vs L2: CZ’s AI Blockchain Conundrum

Oh joy, another debate in the crypto community, because we didn’t have enough of them already 🙄. Binance‘s founder and former CEO, Changpeng Zhao (CZ), has decided to stir the pot and ask the age-old question: should AI projects be built on Layer 1 (L1) or Layer 2 (L2) blockchains? 🤔

Because, you know, it’s not like we have better things to do than argue about blockchain layers and AI. But hey, at least CZ is sparking a conversation, right? 🤷‍♂️

Where Should AI Live? CZ Fuels L1 vs. L2 Discussion

CZ pointed out that the core purpose of AI-focused blockchain projects isn’t to develop a superior blockchain (yawn), but to use blockchain tech to support AI economics. Wow, what a revolutionary idea 🤯.

He noted that L1 provides greater sovereignty and decentralization, but also demands more effort in maintaining nodes and validators. Meanwhile, L2 networks offer convenience by leveraging existing ecosystems like Ethereum‘s decentralized exchanges (DEXs), perpetual contracts, and tools without significant value leakage to the base layer. Because who doesn’t love a good shortcut? 🚀

“L1 vs L2…Does it matter if a new AI project is an L1 or an L2?… Is L1 cooler than L2 or the reverse? Old topic, but wondering if sentiment has changed or not,” CZ posed, welcoming conversation.

Crypto analyst Hitesh Malviya argues that L1 blockchain is the superior choice, because who needs convenience when you can have sovereignty? 🙄 He advocates for L1 projects seeking to establish their own consensus mechanisms, optimize performance, and reduce validator costs. Sounds like a real thrill-ride 🎢.

However, he also warns that despite extensive fundraising and user acquisition efforts, many L1 projects still experience retention drops of 70-90% after token generation events (TGE). Because who doesn’t love a good token dump? 🤑

“…even if you retain users, you would only see one category or niche capturing the maximum traction onchain. So if the destination is already known—retention drop, higher user acquisition costs, and niche-specific demand capture—then why not build an app chain using an L2 stack,” Hitesh suggested.

Walter from the BNB Chain Business Development team supports L2, because who needs sovereignty when you can have accessibility to existing tools and infrastructure? 🤷‍♂️ His comment also hints at speculation regarding CZ’s possible attendance at an upcoming Crypto Summit at the White House. Because, you know, that’s exactly what we need: more crypto summits 🎉.

AI & Blockchain: The Layer 1, Layer 2, and Layer 3 Debate

Investor and blockchain advisor Anndy Lian adds another dimension to the debate. In a subsequent comment on X, he argued that AI is most effectively deployed at Layer-3 (L3). He explains that while implementing AI on L1 is theoretically possible, it’s impractical due to security and resource constraints. Because, you know, AI is all about complexity and overengineering 🤖.

“AI can be implemented on blockchain Layers 1, 2, or 3… In practice, Layer 3 is where AI is most effectively and frequently utilized, leveraging the blockchain’s strengths while accommodating AI’s computational needs,” Lian explained.

CZ discusses AI’s placement in the blockchain ecosystem amid growing interest in AI-integrated L2 networks. In June 2024, Binance Labs (now YZI Labs) invested in Zircuit, an AI-enhanced L2 network that utilizes zero-knowledge rollups to improve security. Because, you know, that’s exactly what we need: more AI-enhanced L2 networks 🤯.

Ethereum co-founder Vitalik Buterin has also been actively discussing L1 and L2 scaling solutions. Last month, Buterin outlined a roadmap for scaling Ethereum’s L1 and L2 protocols in 2025. However, he also recently cautioned that certain L2 networks will likely fail due to weak economic models and poor execution. Because, you know, that’s exactly what we need: more L2 network failures 🤦‍♂️.

The trade-offs between sovereignty, scalability, and accessibility will shape the future of AI-blockchain integration. This could make it essential for developers and investors to weigh their options carefully. Or, you know, they could just throw their hands up in the air and say “meh, who cares?” 🤷‍♂️

AI Blockchain Debate

The debate rages on, and we’re all just along for the ride 🎢. So, what do you think? L1 or L2? 🤔

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2025-03-07 15:09