The debate about the value of Layer-1 blockchains flared up this week. Alliance DAO co-founder Qiao Wang said most L1 tokens do not have lasting strengths. Meanwhile, Dragonfly’s Haseeb Qureshi released a lengthy essay arguing that smart contract chains will retain value in the long term.
Their exchange shows a divide between investors who are optimistic about crypto’s growth and those who think the hype is outweighing fundamentals.
L1s have ‘no moat’ and become commodities
Qiao Wang responded to Qureshi’s essay by explaining why he finds it difficult to hold L1 tokens for the long term. His problem is not the traditional valuation metric, but rather his belief that L1s do not have strong ‘moats’.
Wang states that users can easily switch between chains, developers can redeploy their apps without much hassle, and creating a new blockchain is now quite easy. Therefore, he views L1s as largely interchangeable, non-defensible platforms.
He compared this to something like Amazon Web Services, where high switching costs and deep integration create a strong competitive position that is difficult for competitors to copy. Blockchains, on the other hand, do not have this type of lock-in.
Wang’s conclusion is not that L1s are bad investments, just that they are ‘7/10s’ in a market of ‘9/10s’. He wouldn’t short them, but he doesn’t view them as top long-term picks.
He believes the best way for chains to build a true moat is to ‘verticalize’ – owning both the blockchain and the application layer. According to him, Solana, Base, Hyperliquid and newer business chains such as Tempo are already moving in that direction.
“Crypto is an exponential, not a linear market”
Notably, Qureshi’s post highlighted a growing divide in the way people think about L1 blockchains. In his essay “In Defense of Exponentials,” he argued that the market has become cynical about L1 valuations just when it should be thinking about the long term.
He said that Crypto Twitter has moved from financial nihilism (“none of this is worth anything”) to financial cynicism (“all of it is vastly overvalued”), especially when it comes to new chains like Monad, MegaETH, Hyperliquid L1 and Tempo. He noted that resistance to new L1s is stronger than ever.
Qureshi argued that this attitude ignores the bigger picture: general-purpose blockchains tend to grow exponentially, just like early e-commerce. He compared the current doubts about ETH and SOL to the skepticism Amazon faced for years before proving itself.
He said the use of valuation measures such as price-to-earnings ratios shows a lack of imagination. L1 sales today only look small because the space is still early and volatile. If cryptorails can eventually handle even a small portion of global capital flows, the sheer scale would justify large valuations.
One market: quality versus exponential
Even though Wang and Qureshi disagreed, they were actually presenting two sides of the same issue. Wang looks at things from the investor’s perspective: he wants tokens with strong moats, clear value capture, and stable long-term economies. From that perspective, many L1s seem busy, fragile, and easily disrupted.
Meanwhile, Qureshi looks at the system as a whole: crypto is still early days and L1s are the foundation of a global financial shift. Short-term weakness does not change their long-term potential.
Related: Google Launches Its Own Layer 1 Blockchain for Payments; Focuses on wrinkle, stripe and circle
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