CZ Sparks Debate on AI Blockchain Layer Choice as Binance Stocks Rise

Binance’s founder and former CEO, Changpeng Zhao, known as cz, has sparked a lively debate within the crypto community by questioning whether AI-focused blockchain projects should be built on Layer 1 (L1) or Layer 2 (L2) networks. This discussion aligns with the broader industry trend where the convergence of AI and blockchain technology is becoming increasingly important for developers and investors.

CZ highlighted that the primary goal of such projects is not to create a superior blockchain but to leverage blockchain technology to support AI economics. He noted that while L1 provides greater sovereignty and decentralization, it also requires more effort in maintaining nodes and validators. In contrast, L2 networks offer convenience by leveraging existing ecosystems, such as decentralized exchanges and tools, without significant value leakage to the base layer.

CZ posed the question, “Does it matter if a new AI project is an L1 or an L2? Is L1 cooler than L2 or the reverse?” inviting conversation on the topic. Crypto analyst Hitesh Malviya argued that L1 blockchain is the superior choice for projects seeking to establish their own consensus mechanisms, optimize performance, and reduce validator costs. However, he also warned that many L1 projects experience significant retention drops after token generation events, suggesting that building an AI-focused blockchain as an L2 app chain could be a more practical approach.

Walter from the BNB Chain Business Development team supported the L2 approach, emphasizing its accessibility to existing tools and infrastructure. This comment also hinted at speculation regarding CZ’s possible attendance at an upcoming Crypto Summit.

Investor and blockchain advisor Anndy Lian added another dimension to the debate, arguing that AI is most effectively deployed at Layer 3 (L3). He explained that while implementing AI on L1 is theoretically possible, it is impractical due to security and resource constraints. Lian noted that AI can optimize scalability on L2 but is most frequently utilized in L3, enabling a diverse range of AI-powered applications while leveraging blockchain’s strengths.

CZ’s inquiry comes amid growing interest in AI-integrated L2 networks. In June 2024, Binance Labs (now YZI Labs) invested in Zircuit, an AI-enhanced L2 network that utilizes zero-knowledge rollups to improve security. This investment signals Binance’s strategic focus on AI-blockchain integration, potentially influencing CZ’s latest