Binance CEO Changpeng Zhao (CZ) Shares His Thoughts on the L1 vs. L2 Debate

CZ: Layer 2s Offer Practicality for AI Crypto. This means they can benefit from the reliability and security of an established L1 without having to deal with keeping it running.

Changpeng Zhao (CZ), the former CEO and co-founder of Binance, shared his thoughts on the ongoing debate in the blockchain world: should new AI projects build their own Layer 1 (L1) or use an existing Layer 2 (L2) solution?

According to CZ, if an AI project’s main focus is to utilize blockchain for AI economics rather than innovating on the blockchain protocol, then building on an L2 can be a more practical choice.

CZ: Layer 2s Offer Practicality for AI Crypto

He notes that Layer 2s offer the advantage of speed and efficiency in deploying solutions and connecting with the active ecosystem on platforms like Ethereum.

“If an AI project's main focus is to use blockchain for AI economics (e.g., tokenized contributions to open-source AI models, and governance of the AI community) vs. innovating on the blockchain protocol itself, then it may be more practical to build on an L2 (e.g., rollup) of an existing L1. This way, they can benefit from the reliability and security of an established L1 without having to deal with keeping it running.”

This thought is interesting as many new projects, especially in sectors like AI, are finding that they do not need the full sovereignty of an L1. They can get the required scalability and security with significantly lower costs by leveraging an L2.

Layer 1 vs. Layer 2: Key Differences Explained

An L1 is the base blockchain, such as Bitcoin, Ethereum, and Solana. Building it gives a project full control over its protocol, consensus mechanism, and network settings. This can be appealing because it represents true decentralization and complete ownership of the blockchain’s design.

On the other hand, L2 solutions (like rollups or sidechains) operate on top of an established L1. They provide additional scalability and functionality while depending on the security and ecosystem of the L1 they are built on.

One of the main differences is that creating and maintaining an L1 is a massive undertaking—one that requires setting up and securing a network of nodes and validators. On the other hand, using an L2 means a project can skip the large amount of work of building a new blockchain. As a result, L2 projects can tap into existing decentralized exchanges (DEXs), perpetual markets (perps), developer tools, and a broader community that is already active on the L1.