Warning: Avalanche Co-founder Emin Gün Sirer Raises Concerns About Risky L2 Projects
Emin Gün Sirer, the co-founder of Avalanche blockchain, has sounded the alarm about the infiltration of certain layer-2 (L2) solutions, posing risks to investors. In a recent post on March 23, the Ava Labs boss highlighted concerns over what he termed as "trash" projects and outlined key characteristics for users to watch out for.
Red Flags in L2 Projects – Insights from Avalanche Co-founder:
Gün Sirer pointed out that the proliferation of subpar L2 projects represents a significant hazard in the crypto ecosystem, following recent incidents like the crypto exchange heist involving Sam Bankman-Fried (SBF). He emphasized the loose procedures in launching L2 solutions, which have enabled bad actors to create projects lacking genuine value.
To safeguard investor interests, Gün Sirer outlined several red flags associated with risky L2 solutions. These include discrepancies between a project's narrative and its technical implementation, reliance on centralized sequencers without fraud-proof mechanisms, conducting token sales for fundraising without clear utility on the network, and founders selling personal native tokens before launch.
Additionally, Gün Sirer warned against projects with low-float tokens susceptible to artificial inflation and urged investors to scrutinize founders' morals and habits for any signs of misconduct.
The Simple Authenticity Test by Emin Gün Sirer:
Alongside identifying red flags, Gün Sirer proposed a straightforward test to help investors discern authentic and profitable L2 ventures. He advised assessing whether a project addresses critical issues, or "blockers," in the crypto space, such as scalability, performance, supporting multiple use cases, and integration with traditional finance (TradFi).
Gün Sirer stresses the need to ensure L2 projects address key challenges, guiding investors toward safer investments that foster crypto's growth and sustainability.
