Are You Over Allocated to L1s & Under Allocated to Apps? w/ Avichal
Feb 21, 2025
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Avichal Garg, co-founder of Electric Capital and former tech leader at Facebook and Google, dives into the buzzing world of cryptocurrencies. He addresses the potential oversaturation of Layer 1 protocols and emphasizes the critical role that applications built on them play. Avichal discusses recent hacks in decentralized finance and the repercussions for market structures. He also highlights the need for informed investment strategies, urging listeners to prioritize learning over chasing quick wealth.
The evolving regulatory landscape following the SEC's lawsuit dismissal signals increased optimism and clearer frameworks for crypto growth.
Speculation plays a crucial role in the crypto market, driving both risks and innovations, especially with the rise of meme coins.
A proliferation of diverse Layer 1 blockchains is expected, emphasizing the importance of adaptation and community-focused value capture in this ecosystem.
Deep dives
Current Cycle of Crypto and Regulatory Changes
The current state of the cryptocurrency market reflects a significant turning point, particularly following favorable legal developments, such as the dismissal of the SEC lawsuit against Coinbase. This outcome has been attributed to the proactive stance of Coinbase's leadership, who invested heavily in their defense, ensuring that the industry has a voice. The regulatory landscape is evolving, with legislative movements aimed at establishing clearer frameworks, driven by the understanding that international competitors are keen to capitalize on blockchain technology. Overall, a wave of optimism is emerging as policymakers in the U.S. shift towards defining rules that will facilitate the growth of crypto industries.
The Role and Impact of Meme Coins
Speculation plays a vital role in financial markets, and meme coins exemplify this phenomenon, acting as both a risk and growth driver in the crypto space. While speculation is often viewed negatively, it is proposed that it is an integral part of market dynamics, potentially leading to innovation and investment in fundamental technologies. The challenge lies in managing the speculative nature of meme coins while maximizing their positive contributions, such as infrastructure development. The key is to provide investors with enough information to differentiate between speculative bets and genuine opportunities, without suppressing the excitement that can accompany high-risk investments.
The Future Landscape of Layer 1 Blockchains
The cryptocurrency space may see a proliferation of Layer 1 (L1) blockchains as market needs diversify and user demands vary, indicating that multiple L1s will likely coexist rather than one dominating the space. The concept of value capture suggests that applications and protocols must strive to establish user relationships, which could motivate some protocols to evolve from L1s into applications or platforms. Observing historical patterns in other industries reveals that a diverse ecosystem often fosters competition and innovation, suggesting that viable and specialized L1s will emerge to meet distinct needs. The ultimate question will not be how many L1s are sustainable, but rather how effectively they adapt to and serve their communities.
Evaluating AI's Relationship with Crypto
The integration of artificial intelligence (AI) with blockchain technology has generated interest, yet much of what is currently presented in the market can be seen as overhyped and lacking substance. However, there are genuine prospects where AI could interact meaningfully with decentralized networks, particularly in areas requiring rapid, automated transactions. Projects like those within the Near ecosystem exemplify the potential for AI applications to thrive when combined with blockchain infrastructures. Ultimately, while skepticism remains about many AI-related crypto offerings, there are critical developments that could reshape how these technologies function together over time.
Learning from the Market rather than Speculating
Instead of viewing investments in cryptocurrency as strictly monetary bets, it is essential to perceive them as opportunities for learning and personal growth. This educational approach implies that engaging with blockchain technologies, even at the level of speculative investments, can prepare individuals for future financial landscapes. The focus shifts from quick riches to understanding and utilizing emerging technologies, enriching one's knowledge base and enhancing potential career opportunities. As the market evolves, practical experience may ultimately yield more valuable returns than the pursuit of immediate profit, emphasizing the importance of long-term learning.
Today, on The Milk Road Show, we are joined by Avichal, co-founder of Electric Capital. In this episode, we explore a critical question: are you over-allocated to L1s and under-allocated to the applications built on top of them? Avichal provides his insights into the current L1 landscape, discussing the potential for oversaturation and where value will accrue.
22:30 - Is the L1 landscape crowded and where will value accrue?
36:49 - Should you invest in crypto AI?
📃 Disclaimer 📃
The information presented in this video is for educational and informational purposes only. It should not be considered as financial, legal, or tax advice. The views and opinions expressed by the speakers, are their own and do not constitute professional advice. Investing in cryptocurrencies carries significant risks, including the potential for substantial losses.
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