In a recent discussion, Qiao Wang, the founder of AllianceDAO, highlighted the ongoing struggles of Layer 1 tokens to secure long-term value in the ever-evolving cryptocurrency landscape. His insights shed light on the competitive challenges that these foundational blockchain networks face.
Wang argues that the primary issue for Layer 1 tokens is their lack of distinct competitive advantages. The rise of user-friendly cross-chain bridges has enabled developers to easily migrate applications across different networks. This newfound mobility fosters an environment where no single blockchain can maintain dominance for extended periods.
Furthermore, Wang points out that launching new blockchain networks has become increasingly straightforward, with costs associated with switching chains being significantly lower than those of migrating between traditional cloud services like AWS. This low-cost dynamic fundamentally undermines the long-term value proposition of Layer 1 tokens.
The Impact of Cross-Chain Technology
The advent of cross-chain technology has transformed how applications function across various blockchain networks. Notably, the migration process has become more accessible due to several factors:
- Most applications can transition between chains without encountering major technical hurdles.
- Only applications with highly complex smart contracts face significant migration challenges.
- Development tools and frameworks have become standardized across multiple chains.
- User experience has improved substantially across bridge interfaces.
This enhanced interoperability allows developers to pursue better incentives, reduced fees, or superior performance without being confined to a single ecosystem. As a result, Layer 1 tokens must continually vie for their application bases.
Vertical Integration as a Strategic Solution
Wang suggests a potential remedy for Layer 1 networks seeking a sustainable competitive edge: vertical integration. By directly owning their application layers, these chains can create natural ecosystem lock-in and enhance network effects.
Several prominent chains have already adopted this strategy:
- Solana has cultivated a robust array of native applications and ecosystem projects.
- Base leverages its integration with Coinbase for built-in user acquisition.
- Hyperliquid focuses on specialized financial applications.
- Tempo builds payment solutions directly into its chain.
This approach establishes more considerable barriers around Layer 1 tokens, making them more resilient against competitive pressures and migration trends.
Investment Implications for Blockchain Enthusiasts
For investors with confidence in blockchain technology”s long-term growth potential, Wang advises a focus on chains that control their application layers. Such Layer 1 tokens exhibit stronger defensive characteristics and sustainable competitive advantages.
The conventional model of generic Layer 1 tokens competing solely on technical specifications appears increasingly vulnerable. Instead, those that implement strategic vertical integration and maintain ownership of their application ecosystems are likely to show greater promise for retaining long-term value.
The blockchain sector is undergoing a significant transformation. Layer 1 tokens can no longer depend on merely technical superiority. To achieve sustainable competitive advantages, they must invest in strategic ecosystem development and application layer control. Chains that successfully navigate these challenges are poised to outperform their generic counterparts in the future.
