Ava Labs CEO Emin Gün Sirer is warning that crypto markets will see another wave of dangerous riff-raff projects rise to prominence during the bull market.
Gün Sirer says on the social media platform X that during the last market cycle, most people were not skeptical of FTX CEO Sam Bankman-Fried (SBF), which allowed the current Brooklyn Metropolitan Detention Center inmate to get away with mishandling billions of dollars.
With Bankman-Fried gone, Gün Sirer says that other, potentially worse versions of fraud will fill the vacuum, likely in the form of various layer-2 solutions.
“The next cycle is going to be even more noisy, with even worse behavior. It has become really easy to launch a trash L2…
So we need to be extra vigilant about the red flags that characterize trash L2s:
* Project narrative does not match project tech. E.g. centralized sequencers and layer-2s that lack fraud proofs are trash that is at odds with crypto.
* Projects that sell tokens now in order to raise money to do the work that will lead to some other technology later. Third prong of the Howey test has something to say about this, and it starts with ‘S’ and continues with ‘ecurity offering.’
* Founders dumping personal tokens pre-launch. Teams should be locked up. Eight-figure sales pre-launch in order to ‘thank the staff’ are about as OK as SBF stealing everyone’s money because he’s an ‘effective altruist.’
* Very low float tokens. SBF played this game of manipulating low-float token valuations and borrowing against them. Enough said.”
The CEO calls for more scrutiny against prominent voices in the industry, and to watch out for potential “sociopaths” to show up in the wake of Bankman-Fried.
“Crypto has just a few real blockers at any given time. For instance, in the last cycle, scalability and performance were the outstanding problems and Avalanche and Solana provided two approaches to tackle them. These days, I believe the blockers have to do with supporting multiple use cases on the same platform and integrating with TradFi – but I might be wrong and others might have their own ideas of what blocks adoption by the next billion people.
Whatever these blockers are, say them out loud and ask: ‘Does this person bring something truly game-changing to the table to address the biggest issues facing crypto right now? Would I invite this person to my family dinner and would they be able to explain why they are uniquely positioned to solve it?’
For the trash L2 game is trivially easy, and we just might be looking at a bunch of new sociopaths lining up to fill the void SBF left behind.”
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