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.
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”.
