Thread by @1sat1c

4 those asking about L1s:
Investing in the base layer is a completely different game than the application layer. It’s a different offering, with different principles, and u gotta ask different Q’s.

Not gonna go into everything here but will give some basics.
Ask yourself these 2 questions before investing in anything on the base layer, and you’ll position yourself ahead of 99% of crypto speculators:

1. Does this needs to be on a blockchain/evm, or would it work just fine without it?

Blockchain is built to do certain things. Its advantages are in certain areas. If the thing doesn’t take advantage of its value add, then the blockchain is just an excuse, will become clunky and it won’t work.

There r many tech projects launching as blockchains with absolutely no reason to use one. The solution may have a use case, but can be delivered just as efficiently (or more efficiently) without a blockchain.

2. Does this need a token? I.e does the token serve a function here that couldn’t be achieved without it?

Blockchain software solutions r used irl by cos in many industries (logistics as prime example) without tokens. Many $ have been raised in crypto for things that work just fine irl without a token.

In those cases the token’s primary function is to raise capital. Big tale tell sign it won’t work LT.

Btc and Eth are 2 clear examples of things that HAVE to use a blockchain and also HAVE to have a token. They don’t work without either. Can Btc work with no blockchain? No. Can it exist with no token?! U get it.

What is common b/W base and application layers is importance of adoption. On the base layer, it’s developer adoption.

Developers chose carefully where they spend their time and effort. B/c they can’t practically migrate their work if something goes wrong down the line, they require to know the thing will be there, not get clogged up, has the financing for a long time etc.

I don’t care how many tps a chain’s got, if it will get boggled down/have bugs/run out of budget when adoption happens developers won’t work on it.

On the base layer, Show me adoption WITHIN crypto. That’s what drives value, not “partnerships” with co’s outside of crypto. The latter r opaque, u don’t know what they actually mean (may be nothing), and you have to wait a long time only to find out it was a pilot.

U want teams that understand the game, focused on building something sustainable, and have value add to what currently exists (not easy). A lot of L1 projects launched in 2017 looked promising but became complete duds b/c the team mismanaged timing/tokenomics/community/product.

Have realistic expectations: Eth isn’t going anywhere. The things it does well it does very well. You can’t replicate its community. The activity on top of it is massive. There r 1300 developers working on it. Keep that in mind when you assess your expectations and R/r.

There is much more to DD before allocating to anything. But since this space is 95% apes and degens, doing these basics will help you avoid most pitfalls, and increase your chances of finding the real opportunities.