Crypto Experts Clash Over Layer-1 Blockchain Valuations and Network Effects

A debate has erupted among crypto industry experts over the valuation of layer-1 blockchains, with analysts disagreeing on whether traditional network effect theories apply to blockchain infrastructure.

The controversy centers on claims that crypto may be overvalued due to negative network effects, with current valuations pricing monthly active users at $18,000 to $31,500 each based on a $1.26 trillion market cap excluding Bitcoin and 40-70 million users.

Jasper De Maere, desk strategist at market maker Wintermute, pushed back against the overvaluation thesis, arguing that critics are "applying consumer-app logic to infrastructure." He told Cointelegraph that "users are not supposed to interact with L1s directly," making traditional user metrics irrelevant. Instead, he said "the real network effects for an L1 exist at the validator, security and liquidity layer."

Tomas Fanta, principal at Heartcore, countered claims that fees worsen with usage growth, noting that on high-performance blockchains "the fees change from meaningless to meaningless" while liquidity and yields improve with adoption.

Ben Harvey from Keyrock acknowledged that some L1 blockchains may be overvalued but emphasized that protocol scalability and AI integration are key differentiating factors among networks.