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Binance Founder Ignites Hot Debate on Whether AI Projects Belong on L1 or L2 Blockchains

Binance Founder Ignites Hot Debate on Whether AI Projects Belong on L1 or L2 Blockchains

Binance founder Changpeng Zhao has reignited debate within the cryptocurrency community. The former CEO questioned whether artificial intelligence blockchain projects should be built on Layer 1 or Layer 2 networks.

Zhao, commonly known as CZ, posted on X (formerly Twitter) seeking industry perspectives. “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,” he wrote.

The discussion emerges as AI and blockchain convergence becomes a focal point for developers and investors. Industry participants are increasingly focused on finding the optimal architecture for these emerging technologies.

CZ emphasized that the primary goal isn’t developing superior blockchain technology. Rather, he noted, it’s using blockchain to support AI economics. His comments highlight the practical considerations facing project developers.

Blockchain Architecture Options

Layer 1 networks provide greater sovereignty and decentralization but require more maintenance work. These networks demand significant resources for node and validator operations. Many developers consider this additional control worthwhile despite the higher resource requirements.

Layer 2 solutions offer convenience by leveraging existing ecosystems like Ethereum’s exchanges and tools. This approach allows teams to build on established infrastructure without significant value leakage to the base layer. Development cycles can be substantially shorter with this approach.

Crypto analyst Hitesh Malviya favors Layer 1 for specific projects. He advocates this approach for teams seeking their own consensus mechanisms and reduced validator costs.

“Even if you retain users, you would only see one category or niche capturing the maximum traction onchain,” Malviya noted. He warned that many Layer 1 projects experience 70-90% user retention drops after token generation events.

Given these challenges, Malviya suggests building AI blockchains as Layer 2 app chains. This approach enables faster development and scalability. Walter from BNB Chain’s Business Development team similarly supports Layer 2 solutions for their accessibility to existing tools.

Expanding the Debate Between Two Layers

Blockchain advisor Anndy Lian introduced another perspective. He argued that AI is most effectively deployed at Layer 3. “AI can be implemented on blockchain Layers 1, 2, or 3… In practice, Layer 3 is where AI is most effectively and frequently utilized,” Lian explained. According to Lian, implementing AI on Layer 1 is theoretically possible but impractical. Security and resource constraints make it difficult to execute effectively. Layer 3 enables diverse AI-powered applications while leveraging blockchain’s fundamental strengths.

CZ’s timing may suggest strategic planning. Binance Labs invested in Zircuit in June 2024, an AI-enhanced Layer 2 network using zero-knowledge rollups. This investment signals Binance’s interest in AI-blockchain integration and may explain his current market research.

Ethereum co-founder Vitalik Buterin has also contributed to scaling discussions. Last month, he outlined a roadmap for scaling Ethereum’s protocols in 2025. Buterin recently cautioned that certain Layer 2 networks will likely fail due to weak economic models.

The debate continues to evolve among major industry players. Tradeoffs between sovereignty, scalability, and accessibility will shape future AI-blockchain integration. Developers and investors must carefully consider these factors for upcoming projects.

 

Source: https://yellow.com/news/binance-founder-ignites-hot-debate-on-whether-ai-projects-belong-on-l1-or-l2-blockchains

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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Pantera Capital founder faces tax probe over $850M crypto profits: Report

Pantera Capital founder faces tax probe over $850M crypto profits: Report

Dan Morehead, founder and managing partner of crypto investment firm Pantera Capital, is reportedly under investigation for potential federal tax law violations after moving to Puerto Rico, a well-known tax haven.

In a letter received on Jan. 9, the US Senate Finance Committee (SFC) requested information on over $850 million in investment profits Morehead earned after relocating to Puerto Rico in 2020.

Morehead “may have treated” these profits as exempt from US taxes, according to a Jan. 9 letter from Senator Ron Wyden seen by The New York Times.

According to the letter, the SFC was investigating tax compliance among wealthy Americans who moved to Puerto Rico and may have improperly applied a tax break to avoid paying taxes on income earned outside the island.

“In most cases, the majority of the gain is actually U.S. source income, reportable on U.S. tax returns, and subject to U.S. tax,” the letter reportedly states.

“I believe I acted appropriately with respect to my taxes,” Morehead said in a statement, adding that he moved to Puerto Rico in 2021.

Pantera Capital, founded by Morehead, was the first cryptocurrency fund in the US and has seen its initial investments grow by more than 130,000%, he wrote in a blog post on Nov. 26, 2024.

Morehead launched Pantera Bitcoin Fund in July 2013, making a lifetime return of more than 1,000 times the return on its first Bitcoin purchase at $74, he said. He added that 1% of financial wealth hadn’t come across Bitcoin at the time.

Pantera Capital holds over $5 billion worth of assets under management, with over 100 venture investments and 47% of its capital invested outside the US, according to the company’s homepage.

Crypto taxes attract regulatory attention worldwide

The investigation into Morehead comes amid increased regulatory scrutiny of cryptocurrency taxes. In June 2024, the Internal Revenue Service (IRS) issued a new rule requiring US crypto transactions to be subject to third-party tax reporting for the first time.

Starting in 2025, centralized crypto exchanges (CEXs) and other brokers will start reporting the sales and exchanges of digital assets, including cryptocurrencies.

This decision could push crypto investors to decentralized platforms in a “paradoxical situation” that could make tax revenue harder to track, Anndy Lian, author and intergovernmental blockchain expert, told Cointelegraph.

Showcasing the crypto industry’s backlash, the Blockchain Association filed a lawsuit against the IRS in December 2024, arguing that the rules are unconstitutional because they include decentralized exchanges under the “broker” term, extending data collection requirements to them.

 

Source: https://cointelegraph.com/news/pantera-capital-founder-tax-investigation-crypto

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Terraform Labs Founder Do Kwon Will be Extradited to the United States

Terraform Labs Founder Do Kwon Will be Extradited to the United States

According to local reports, Montenegro’s Minister of Justice has signed an order to extradite Terraform Labs founder Do Kwon to the United States, rejecting South Korea’s request for extradition. South Korean authorities accuse Kwon of misleading investors and concealing assets.

This decision follows a Supreme Court ruling in Montenegro, which confirmed that legal requirements for extradition had been satisfied.

Do Kwon To Face Trial in the US

Earlier this week, BeInCrypto reported that a US extradition was likely after Montenegro’s court dismissed Do Kwon’s appeal against extradition, citing legal flaws in his case.

While the extradition date isn’t final yet, Kwon will likely face a trial similar to Sam Bankman-Fried. The FTX founder is currently serving a 25-year sentence, and he was also extradited from the Bahamas. However, his extradition was far less complicated than Kwon’s.

“Taking into account the Supreme Court’s ruling, the Ministry of Justice reviewed all facts and circumstances and assessed criteria such as the severity of the criminal offenses, the location of their commission, the nationality of the requested individual, as well as other circumstances. Based on this, it was concluded that the majority of the criteria stipulated by law favor the request for extradition by the competent authorities of the United States,” stated the Ministry of Justice in its announcement.

The Terraform Labs founder is under investigation in both the US and South Korea for his role in a major cryptocurrency collapse in May 2022.

At that time, the crash of TerraUSD and Luna erased $40 billion from the crypto market. It triggered a widespread financial fallout, leading to the bankruptcy of several companies in the sector.

Furthermore, authorities allege that Kwon deceived investors and suspect he concealed significant assets. In March 2023, Kwon and his business partner, Han Chong Jun, were arrested at Podgorica Airport in Montenegro while attempting to board a flight to Dubai using fake passports.

Kwon was sentenced to four months in prison in Montenegro. However, he is currently detained at the Spuž Centre for Reception of Foreigners.

“Extraditing him to the US could have major implications for how international crypto fraud cases are handled. It’s interesting to see how justice systems across borders interact in these high-profile cases,” author Anndy Lian wrote on X (formerly Twitter).

Historic Settlement with the SEC

In June 2024, Terraform Labs reached a historic settlement with the SEC, agreeing to pay $4.47 billion in penalties. The settlement included $3.6 billion in disgorgement fines, a $420 million civil penalty, and $467 million in pre-judgment interest.

Also, Kwon was personally ordered to pay over $200 million, including $110 million in disgorgement, $80 million in civil penalties, and $14.3 million in interest.

Controversy has also emerged surrounding Kwon’s alleged political connections in Montenegro. Reports suggest he may have financial ties to local political figures, including Milojko Spajic, leader of the Europe Now party.

Overall, these connections raised concerns about potential interference in the extradition process. In 2023, Montenegro’s prime minister called for an investigation into these claims, adding another layer of complexity to the case.

 

Source: https://beincrypto.com/do-kwon-extradition-us-montenegro/

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j