Alliance DAO Leader Rejects L1 Tokens As Lasting Investments
- QwQiao states that L1 tokens lack firm moats as users move across chains with ease.
- He notes that new chains rise fast, which weakens the long-term hold of older L1 networks.
- He advises a deeper focus on app layers, which create value than basic L1 tokens alone.
Alliance DAO co-founder QwQiao issued new concerns about the long-term value of Layer 1 public-chain tokens, stating that these assets lack durable moats and face rapid commoditization as users and developers move across chains with growing ease. He said his hesitation is unrelated to their high price-to-earnings ratios and instead linked to structural weaknesses that reduce their ability to hold value in a competitive market.
He noted that current blockchain conditions enable quick asset movement, rapid developer migration, and easy chain creation, which together reduce any meaningful advantage for long-term holders.
Falling Switching Costs Erode Chain Loyalty
QwQiao said that today’s crypto environment gives users simple ways to shift assets between chains, which lowers loyalty and weakens long-term attachment to any single network. He added that developers can move most applications within hours unless they use very complex contracts. This flexibility removes friction and increases the likelihood of fast migration when new opportunities appear.
He wrote on X, “I don’t think L1 tokens are necessarily bad investments. I certainly wouldn’t short them. I just can’t convince myself that they are great investments.” He said investors have thousands of assets to choose from and argued that it makes sense to pick only those with durable moats and reasonable pricing.
Additionally, he noted that producing new blockchains has become simple. The reduced barriers result in a constant wave of new platforms, which creates pressure on older chains and spreads developer attention. He suggested that applications and users may choose fresher, cheaper, or faster networks when alternatives appear.
Vertical Integration Seen as the Only Path to a Moat
QwQiao argued that chains must control their application layers to strengthen their long-term position. He said this approach allows networks to build sticky ecosystems that are harder to abandon. He suggested that Solana, Base, and Hyperliquid already follow this approach as they develop their own applications directly on their platforms.
He expanded on this idea in another X post, saying, “I have a hard time convincing myself to own l1 tokens long term, not because the P/E ratios are high, but because they have no moat.” He added that simple bridging tools, fast developer migration, and rapid chain deployment make it difficult for L1 tokens to capture lasting value. He compared blockchain switching costs with the difficulty of migrating data from cloud services like Amazon Web Services, noting that blockchains offer far easier movement.
Furthermore, he said the only clear expression of long-term belief in the crypto sector is to “bet on the app layer,” which he described as the strongest location for durable value.
Related: Alliance DAO Co-Founder Warns of Crypto Top, Cites AI Power
Rapid Migration Accelerates Chain Competition
Developers also face easy migration paths. Many can move code across compatible chains within days, and modern tools simplify movement across non-compatible networks. This environment allows applications to shift quickly when incentives or performance conditions change.
He also noted that launching a new blockchain or application-based rollup now takes only weeks due to readily available deployment kits. This pace increases competition and raises questions for long-term investors. Should investors still commit capital to chains that can be replaced so quickly?
