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Emin Gün Sirer’s Warning on Deceptive Trends in Layer-2 Crypto Projects
Emin Gün Sirer, the co-founder of Avalanche blockchain, has raised concerns about deceptive trends infiltrating certain layer-2 (L2) solutions, posing risks to investors. In a recent post, Sirer highlighted the dangers of these “trash” projects and educated users on identifying common red flags.
“Trash” L2 Projects Flood the Market
Sirer argues that the launch procedures for L2 solutions are lenient, enabling bad actors to create projects lacking in value. He outlined warning signs associated with risky L2 solutions, such as discrepancies between a project’s narrative and its technology, centralized sequencers, and token sales primarily for fundraising.
He also cautioned against founders selling personal native tokens before launch, emphasizing the importance of authenticity and transparency in projects.
Issue of Low-Float Tokens within L2s
Sirer expressed concern about low-float tokens in projects, which can artificially inflate values through manipulative tactics. He advised investors to evaluate the moral conduct of project founders as part of the due diligence process.
Identifying Authentic and Profitable Ventures
Sirer proposed a test for investors to navigate the growing number of L2 projects. By identifying critical challenges in the crypto space, such as scalability and integration with traditional finance, users can assess whether a project addresses these issues effectively.
Before investing in an L2 solution, users should ensure that the project aligns with the current challenges facing the crypto ecosystem.
Growth of Ethereum’s Layer 2 Ecosystem
The Ethereum Layer 2 ecosystem has seen significant growth, with a total value locked (TVL) exceeding $27 billion. Transaction activity on Layer 2 networks has surpassed that of the Ethereum mainnet, with networks like Arbitrum leading the market share.
Arbitrum has experienced a consistent increase in TVL, indicating growing interest and adoption in Ethereum’s Layer 2 solutions.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
