Opinion by: Ray Song, founder at aPriori
Having experienced markets for a significant time, you begin to recognize trends. The tools we utilize and the systems we develop are ever-evolving. In the realm of crypto, one of the most notable transformations occurring now is at the foundational level.
Historically, the layer 1 discussion has been primarily driven by Ethereum for composability and a widespread developer community, Solana for speed, and Cosmos for sovereignty. Choosing an L1 was akin to selecting a trading venue, assessing fees, liquidity, and execution.
However, this decision has recently shifted from tactical to strategic. Beyond developers weighing ecosystem options, large corporations are commencing the construction of their blockchains from the ground up. When entities like Stripe, Coinbase, and others with substantial regulatory and distribution leverage engage in this, the L1 ceases to be an impartial platform and transforms into a barrier.
The Stripe Tempo moment
Consider the recent Stripe news. It was revealed that “Tempo,” a payment-centric layer 1, is being developed in collaboration with Paradigm. For those who have traded long enough, it’s clear that Stripe has ulterior motives. This serves as a settlement-layer initiative, allowing control over the foundational layer, fees, and uptime.
In conventional markets, clearing and settlement often remain hidden from end-users, yet that is where true leverage exists. Tempo would provide Stripe with a blockchain meticulously crafted for reliable fees, predictable settlement times, and unmatched merchant distribution. This is a culmination of 20 years of experience in payment processing, adapted to crypto infrastructures.
From permissionless to permissioned
A distinct spectrum is beginning to form. On one side are fully decentralized, censorship-resistant protocols. These chains may lack the refinement or compliance reassurance that institutions desire, but they serve as the arenas where authentic innovation occurs. Ethereum in its early stages, Bitcoin even today, and newer privacy chains are pushing the boundaries of what is feasible without KYC restrictions.
On the opposite end lie corporate-governed L1s aligned with regulated custodians and exchanges. Coinbase’s Base chain is already operational. Binance’s BNB Chain effectively constitutes a corporate ecosystem. Stripe is now joining that tier.
Positioned in the middle are hybrids, L1s that aspire to be sufficiently open to attract the crypto-native audience while being structured enough to ensure institutions feel secure. It’s in this middle ground that some of the most compelling conflicts will unfold, as it’s where both factions may converge.
This isn’t a level playing field
Crypto-native founders find it challenging to compete with Stripe or Coinbase in terms of distribution and regulatory factors. The larger players can swiftly acquire licenses and onboard millions of merchants with a single API call.
Related: After stablecoin push, Stripe acquires crypto wallet developer Privy
While this doesn’t render permissionless builders powerless, it certainly alters the dynamics. Direct competition on the same fronts (licensing, institutional distribution) is perilous. The opportunity lies in areas that corporate L1s will ignore or be unable to pursue.
They are unlikely to prioritize privacy features that could raise regulatory concerns, and they cannot move as swiftly in delivering innovative DeFi primitives, as every new feature requires legal approval. They will always need to balance decentralization with shareholder interests.
Where the opportunities still live
The most groundbreaking advancements in DeFi emerged because anyone could connect to one another’s contracts without needing consent. Achieving that becomes more challenging within a corporate-controlled L1 that has restrictions. If you can provide genuine composability, you’ll draw in the builders they cannot.
Moreover, crypto-native founders can explore tokenomics, governance frameworks, or cross-chain integrations when traditional players require a risk evaluation.
Lastly, it’s important to remember the significance of cultural alignment. Ethereum boasts an identity, and Bitcoin embodies a mission. If you can express a vision that resonates with a particular audience, whether privacy advocates, DeFi enthusiasts, or niche regional adopters, you can outsmart corporate L1s in those markets.
The rise of corporate L1s reconfigures the liquidity landscape. Should Stripe’s Tempo succeed with merchants, you can expect predictable, high-volume transactions, which benefit low-risk, yield-capture strategies. However, the volatility and asymmetric opportunities will persist in the permissionless frontier, where protocol modifications, governance transitions, or market narratives can dramatically affect valuations overnight.
In a permissionless chain, risks are technical and market-driven. In a corporate chain, risks stem from regulatory and business model factors. While Tempo may not technically fail you, a policy change could adversely affect your yield.
The endgame
This isn’t a zero-sum competition between corporate and permissionless chains. They are likely to enhance each other. Corporate L1s will manage compliant, large-volume flows that attract conservative capital, while permissionless chains will continue pushing the envelope, fostering the innovations that corporations will ultimately embrace.
For traders and builders, the genuine alpha will arise from understanding how value transitions between these domains. The Stripe Tempo announcement indicates that the foundational layer has evolved into strategic territory. In markets, those controlling the infrastructure ultimately dictate the margins.
Opinion by: Ray Song, founder at aPriori.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
