The crypto industry has long been obsessed with new Layer 1 blockchains. First came Ethereum, then Solana, then a flood of so-called “Ethereum killers” like Avalanche, Near, Aptos, and Sui. Each new entrant claims to be faster, cheaper, and more scalable than the last, promising to finally solve the blockchain trilemma. Yet despite the constant churn of innovation, the harsh reality remains: Layer 1 blockchains have no real moat, and increasingly, they seem to have no lasting monetary value either.
The Fundamental Problem: No Sustainable Competitive Advantage
Most industries develop strong moats—defensible advantages that prevent competitors from simply copying and surpassing them. In traditional tech, moats come from network effects, economies of scale, brand power, or deep integrations into existing infrastructure. Crypto Layer 1s, however, struggle to establish any of these moats for several reasons:
- Everything Is Open-Source – Any technical breakthrough can and will be copied by the next blockchain project. If one chain optimizes for speed (e.g., Solana’s parallel execution), another can simply improve upon it (e.g., Sui’s Move language). There’s no proprietary edge.
- Liquidity and Users Are Nomadic – The crypto ecosystem is driven by short-term incentives, not deep brand loyalty. Users and developers follow grants, airdrops, and cheaper fees rather than sticking with one ecosystem.
- Interoperability Reduces Stickiness – Cross-chain bridges and interoperability protocols (e.g., LayerZero, Wormhole) make it easier than ever to move assets across chains.
- DeFi and Applications Are Portable – DeFi protocols are largely chain-agnostic. Uniswap, Aave, and other major protocols now deploy on multiple chains, meaning no Layer 1 has exclusive access to killer applications.
- Scaling Solutions Are Commoditizing Blockspace – Layer 2s (Arbitrum, Optimism, zkSync) and modular chains like Celestia are making raw Layer 1 blockspace a commodity.
Because of these dynamics, new Layer 1s are constantly being launched, each with minor incremental improvements over the last. But if every innovation can be copied, improved, and replaced, no Layer 1 has a durable edge.
The Tokenomics Problem: Layer 1s Are Extractive, Not Generative
Beyond their lack of moats, modern Layer 1s also suffer from a tokenomics problem that makes them structurally unsustainable in the long run.
- Massive Insider Allocations – The earliest Layer 1s (Bitcoin, Ethereum) had fairer launches with broad community distribution. Newer chains, however, launch with 30-50%+ of tokens pre-allocated to VCs, team members, and insiders. This concentrates power and leads to an inevitable dump on retail.
- Artificially High Fully Diluted Valuations (FDV) – Many Layer 1s launch with ridiculously high FDVs ($5B-$10B+) before proving any real adoption.
- Early Investors Use Retail as Exit Liquidity – The pattern is clear: insiders accumulate tokens early, price pumps on hype, unlock schedules release more supply, and early investors cash out while retail bags the long-term depreciation.
- Native Tokens Have Weak Demand – Unlike Ethereum, where ETH is deeply integrated into network fees, staking, and DeFi collateral, many Layer 1 tokens have little fundamental utility outside of staking.
- Liquidity Is Sucked Out of the Ecosystem – Instead of growing the crypto economy, many new Layer 1s simply extract liquidity from existing projects.
This model might work in the short term—new chains can pump on hype and speculation—but it’s not a sustainable way to create long-term value.
The Endgame: Most Layer 1s Will Trend to Zero
Given these structural issues, it’s hard to see most Layer 1 tokens retaining long-term monetary value. In fact, many Layer 1s may eventually trend to zero for the following reasons:
- As incentives dry up, users and developers will leave for the next hyped chain.
- Once vesting schedules unlock, excessive token dilution will suppress price growth.
- With DeFi and applications becoming multi-chain, no single Layer 1 will retain dominance.
- Layer 2s and app-specific chains (e.g., Cosmos, Polkadot) will further erode the value of general-purpose Layer 1s.
The only Layer 1s likely to survive are those that either (1) have deep network effects (Ethereum), (2) become the default settlement layer for Layer 2s, or (3) create real-world integrations beyond speculation. Everything else is just another temporary liquidity rotation.
Conclusion: Crypto Needs to Move Beyond Speculative Layer 1s
The current Layer 1 model is unsustainable. With no strong moats and an increasingly extractive token distribution model, most new Layer 1s are just VC exit scams wrapped in tech jargon. Rather than endlessly chasing the next Ethereum killer, the crypto industry needs to focus on real utility, sustainable tokenomics, and long-term user adoption.
Until then, expect the cycle to continue: new chains launch, insiders profit, retail gets burned, and the industry repeats the same mistakes. But eventually, the market will wise up—and when it does, most of these Layer 1 tokens will be worthless.
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