How To Avoid Another SBF Experience In The Coming L2 Cycle – Aval Labs CEO

Emin Gun Sirer, CEO of Ava Labs, has highlighted the red flags users should consider before investing in new L2 projects in the upcoming cycle. According to Sirer, ignoring these red flags could lead to an outcome similar to what happened with Sam Bankman-Fried, whom many people followed based on superficial traits.

Sirer listed the red flags via a recent post on X, noting the absence of a narrative that matches the project tech as the first signal of unsustainability. For instance, he believes centralized sequencers and L2s that lack fraud proofs are unsustainable and are at odds with crypto.

The Ava Labs founder does not support projects that sell tokens now to raise money to do the work that will lead to another technology later. According to him, the third prong of the Howey Test qualifies such exercises as Security Offerings.

In continuation, Sirer compared founders who dump personal tokens pre-launch with Bankman-Fried. He believes their traits are similar, with potentially the same outcomes. He further noted that 8-figure sales pre-launch to “thank the staff” are about the same as Bankman-Fried stealing users’ money because he is an “effective altruist.”

Sirer thinks projects with low-float tokens are risky and unsustainable. He cited Bankman-Fried’s pattern of manipulating low-float token valuations and borrowing against them as an example users should learn from. Additionally, the blockchain expert advised users not to overlook founders’ behavioral patterns. For instance, “founders complaining that they are running out of cocaine” is a signal no one should take lightly.

The Ava Labs founder explained how crypto users can test new projects for authenticity. He noted crypto has just a few authentic blockers at a time. For instance, scalability and performance were the outstanding problems in the last cycle, and Avalanche and Solana provided two approaches to tackle them.

Sirer believes the blockers for this cycle blockers have to do with supporting multiple use cases on the same platform and integrating with TradFi. He advised users to probe new projects to see if they bring something game-changing to address the significant issues facing crypto.