Binance's founder and former CEO, Changpeng Zhao (CZ), has ignited a new conversation within the crypto community. The discussion revolves around whether AI-centric blockchain projects should be developed on Layer 1 (L1) or Layer 2 (L2) networks.
This topic is in line with current industry trends, as the merging of AI and blockchain technology gains prominence among developers and investors.
The debate on the preferred location for AI operations: L1 or L2
CZ recently took to Twitter to express that the primary objective of such projects is not to create a superior blockchain system but to utilize blockchain technology to bolster AI economics.
While L1 offers more independence and decentralization, it necessitates more effort in maintaining nodes and validators. In contrast, L2 networks provide convenience by utilizing existing ecosystems like Ethereum’s decentralized exchanges (DEXs) and tools without significant value dilution to the base layer.
Engaging his audience, CZ posed the question, "L1 vs L2... Does it really matter if a new AI project is on L1 or L2? Is one better than the other? Old topic, but curious if sentiments have shifted or not."
Hitesh Malviya, a crypto analyst, advocates for L1 blockchain as the superior choice, citing its ability to establish unique consensus mechanisms, enhance performance, and reduce validator expenses. However, he cautions that many L1 projects face retention declines post-token generation events, leading to specific niche demands capturing most usage.
Amid these challenges, implementing an AI-focused blockchain as an L2 app chain might be a more feasible option, according to Malviya, allowing for faster development, marketing, and scalability.
Walter from the BNB Chain Business Development team supports L2, emphasizing its accessibility to existing tools and infrastructure, hinting at potential discussions regarding CZ's involvement in an upcoming Crypto Summit at the White House.
AI & Blockchain: The Layer 1, Layer 2, and Layer 3 Perspective
Blockchain advisor Anndy Lian contributes to the debate by proposing that AI is best deployed at Layer 3 (L3), citing security and resource constraints with L1 implementation. Lian mentions the effectiveness of AI utilization in L3, combining blockchain strengths with AI computational needs.
While L2 networks offer scalability for AI, Lian asserts that L3 is the most effective space for AI applications, leveraging blockchain technology efficiently.
CZ's inquiry into AI's integration in the blockchain ecosystem coincides with Binance's investment in Zircuit, an AI-enhanced L2 network that enhances security using zero-knowledge rollups.
Ethereum co-founder Vitalik Buterin also joins the conversation, outlining plans to scale Ethereum's L1 and L2 protocols in 2025. However, Buterin warns of potential failures in certain L2 networks due to weak economic models and execution.
The ongoing debate surrounds whether AI projects should establish independent chains or integrate with existing frameworks. CZ's interest in this topic suggests a possible venture into AI-driven blockchain initiatives in the future, considering Binance's focus on AI-blockchain integration.
As developers and investors navigate through the trade-offs of sovereignty, scalability, and accessibility, strategic decision-making will shape the landscape of AI-blockchain integration. Vigilance and astute evaluation of options become crucial in this evolving landscape.