This week, the debate over the value of layer 1 blockchains intensified. Qiao Wang, co-founder of Alliance DAO, said that most L1 tokens do not have lasting strength. Meanwhile, Dragonfly’s Haseeb Qureshi published a lengthy essay arguing that smart contract chains hold long-term value.
Their exchanges illustrate the divide between investors who are bullish on the growth of cryptocurrencies and those who believe the hype has outweighed the fundamentals.
L1 has no “moat” and is becoming a commodity
Qiao Wang responded to Qureshi’s essay and explained why it is difficult to hold onto L1 tokens in the long term. His problem is not traditional metrics, but rather his belief that L1 lacks a strong “moat.”
Wang argues that users can easily switch between chains, developers can redeploy apps without much effort, and creating new blockchains is now much easier. Because of this, he believes L1 is largely replaceable and not a defensible platform.
He compared this to services like Amazon Web Services, whose high switching costs and tight integration create a strong moat that is difficult for competitors to imitate. Blockchain, on the other hand, has no such lock-in.
Wang’s point is not that L1 is a bad investment, just that L1 is 7/10 in a 9/10 market. He wasn’t selling them short, but he didn’t see them as long-term top picks.
He believes that the best way for a chain to build a real moat is to “verticalize,” or own both the blockchain and the application layer. In his view, new corporate chains like Solana, Base, Hyperliquid, and Tempo are already heading in that direction.
“Cryptocurrency is an exponential market, not a linear market.”
Notably, Qureshi’s post highlighted the growing divide in how people think about L1 blockchain. In his essay “Defending Exponential Theory,” he argued that the market has become cynical about L1 valuations at a time when it should be thinking long-term.
He said that crypto Twitter is moving from financial nihilism (“none of it is worth anything”) to financial cynicism (“everything is hugely overvalued”), especially regarding new chains such as Monad, MegaETH, Hyperliquid L1, and Tempo. He noted that the backlash against the new L1 is stronger than ever.
Qureshi argued that this attitude ignores the bigger picture: general-purpose blockchains are likely to grow exponentially, similar to early e-commerce. He compared today’s doubts about ETH and SOL to the skepticism Amazon faced for years before proving itself.
He said using valuation metrics such as P/E showed a lack of imagination. The reason L1 revenue looks small today is because the space is still in its infancy and volatile. If crypto rails end up handling a small portion of the world’s capital flows, their sheer size will justify a big valuation.
One Market: Quality vs. Exponential
Although Mr. Wang and Mr. Qureshi had different opinions, they were actually emphasizing two aspects of the same issue. Mr. Wang thinks from an investor-first perspective. He wants a token with a strong moat, clear value capture, and stable long-term economics. From that perspective, many L1s appear congested, fragile, and easily disrupted.
Qureshi, on the other hand, is looking at the system as a whole. Cryptocurrencies are still in their infancy and L1 is the foundation of a global financial shift. Short-term weakness does not change their long-term potential.
Related: Google to launch its own layer 1 blockchain for payments. Aim for ripples, stripes, and circles
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