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In a recent X post, Emin Gün Sirer, the co-founder of Avalanche blockchain, raised concerns over the influx of substandard layer-2 (L2) solutions in the crypto ecosystem. He compared the situation to the aftermath of the FTX debacle, cautioning investors about the risks posed by these “trash” projects.
In the post, Sirer highlighted some red flags associated with these risky L2 ventures. Firstly, he warned against projects with a disconnect between their marketing narratives and technical implementations, such as those with centralized sequencers without fraud-proof mechanisms.
Additionally, he advised investors to take caution toward L2 solutions conducting token sales solely for fundraising purposes rather than practical network utility.
Another red flag, according to Sirer, is when project founders sell off their native tokens before launch, indicating a potential lack of confidence in the venture’s long-term prospects. He further flagged projects with low-float tokens, which are susceptible to artificial value inflation through manipulation tactics.
To help investors identify genuine L2 projects, Sirer advises checking whether the project truly solves critical issues facing the crypto space, such as scalability, performance, and integration with traditional finance. Projects failing to provide practical solutions to these challenges should raise suspicion.
Also read: Polygon Addresses zkEVM Outage Amid Community Concerns
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