By Key Points
- Binance CZ AI Layer 1 Layer 2 Debate
- CZ questions if AI projects should build on Layer 1 or Layer 2.
- L1 offers control but struggles with user retention and costs.
- L2 provides scalability and easier adoption via existing ecosystems.
- Some experts suggest AI is best suited for Layer 3 blockchains.
Changpeng Zhao (CZ), Binance’s founder and former CEO, has reignited a debate in the crypto space: Should AI-driven blockchain projects be built on Layer 1 (L1) or Layer 2 (L2) networks?
In a recent post on X (Twitter), CZ highlighted that AI projects don’t need to focus on building a superior blockchain. Instead, the priority should be integrating blockchain technology to support AI economics efficiently.
L1 vs L2. Was chatting with a founder this morning.
Does it matter if a new AI project is an L1 or an L2?
The project’s core is not to develop a better blockchain, but to use a blockchain to help with AI economics.
Having your own L1 feels like you have more sovereignty,…
— CZ 🔶 BNB (@cz_binance) March 6, 2025
CZ’s question has sparked discussions among industry experts. Proponents of L1 argue that creating a sovereign blockchain allows for greater control over consensus mechanisms, security, and validator costs.
However, L1 networks often face low user retention, with projects experiencing 70-90% drops after token generation events (TGE) despite significant funding.
On the other hand, L2 advocates believe that leveraging established ecosystems like Ethereum offers faster adoption, better scalability, and lower development costs.
L1 is cooler when you build your own consensus, optimize the database and memory to scale performance, reduce the cost of running validator nodes to scale block production and decentralization, and raise enough funds to bootstrap attention and the marketing cycle to establish…
— hitesh.eth (@hmalviya9) March 6, 2025
Crypto analyst Hitesh Malviya noted that AI app chains built on L2 could scale more efficiently while avoiding the complexities of maintaining a separate blockchain.
Meanwhile, Walter from the BNB Chain Business Development team emphasized the convenience of L2 networks. His comments have also fueled speculation that CZ may be preparing for a potential AI-related announcement at an upcoming Trump Crypto Summit.
Is Layer 3 the Future for AI-Blockchain Integration?
While most of the debate centers around L1 and L2, blockchain advisor Anndy Lian introduced another perspective: AI might be best suited for Layer 3 (L3) solutions.
According to Lian, implementing AI at L1 is possible but impractical due to security and computational constraints. L2 can improve scalability, but L3 provides the best environment for AI-driven applications, offering the benefits of blockchain security while catering to AI’s high processing demands.
Binance has already made moves in AI-blockchain integration. In June 2024, Binance Labs (now YZI Labs) invested in Zircuit, an AI-enhanced L2 network utilizing zero-knowledge rollups to enhance security.
This investment suggests Binance is betting on AI-driven L2 solutions, possibly influencing CZ’s latest discussion.
Ethereum co-founder Vitalik Buterin has also weighed in on the L1 vs. L2 debate, outlining a roadmap for Ethereum’s scalability. However, Buterin cautioned that many L2 networks could fail due to weak economic models and poor execution.
His remarks further underscore the challenges AI projects face when choosing between L1 and L2.
How AI and Crypto Trends Are Shaping Market Sentiment
Beyond technical discussions, AI and blockchain integration is influencing crypto market sentiment. As seen with Ether’s sentiment hitting a yearly low, investor confidence often fluctuates based on technological shifts and macroeconomic trends.
My quick take @cz_binance :
AI can be implemented on blockchain Layers 1, 2, or 3:
– On Layer 1, it’s theoretically possible but impractical due to resource and security constraints.
– On Layer 2, it’s feasible for optimization tasks, such as improving scalability.
– On Layer 3,…— Anndy Lian (@anndylian) March 6, 2025
Meanwhile, Bitcoin’s price action has been closely linked to liquidity and geopolitical events. Analysts have noted that a Bitcoin rally in March could coincide with increasing AI-driven blockchain investments.
Additionally, speculation surrounding Trump’s return and policies on AI and blockchain have fueled strategic Bitcoin reserve discussions, further connecting AI innovations with broader market trends.
With AI and blockchain rapidly converging, the choice between sovereignty (L1), scalability (L2), or specialization (L3) will be critical for future projects. Developers and investors must carefully assess the trade-offs before committing to a blockchain layer for their AI applications.
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