Why the Real Debate Is Not L1 vs Apps, but Jurisdictions vs Commodities**

The recent debate between Santiago Roel and Haseeb Qureshi is one of the most intellectually honest and important discussions we’ve seen in crypto valuation in years. It surfaces a question the market can no longer avoid:

Are Layer 1s fundamentally overvalued — or are we applying the wrong valuation model to something that is not a company, not infrastructure, and not even a platform in the traditional sense?

This debate did not emerge randomly. As Santiago himself noted:

“It’s time to talk about L1s because when markets go down, everyone starts talking about fundamentals.”

That observation is more revealing than it may seem. Narratives rarely precede price. They usually follow it.

Markets move first. Explanations come later.

And once a narrative gains traction, it becomes reflexive: it reinforces positioning, legitimizes exits, and pressures founders and protocols into strategic decisions that may or may not be structurally correct.

This is precisely where crypto finds itself today.

One of the most underappreciated truths in investing is that markets often act as predictive mechanisms, revealing structural tensions long before consensus forms.

When L1 prices stagnate or fall despite regulatory clarity, ETF approvals, and institutional narratives, it forces a difficult question:

Is the market signaling overvaluation — or signaling a strategic misalignment inside the protocols themselves?

Santiago’s answer is clear: L1s are overvalued, full stop.
Haseeb’s response is equally clear: markets are pricing long-term exponential adoption, not current cash flows.

Both positions are internally coherent.
Both are incomplete.

The debate often collapses into a simplistic binary:

• Either L1s are wildly overvalued on price-to-sales metrics

• Or they are early-stage exponential technologies where traditional valuation doesn’t apply

But this framing misses the real issue.

The real question is not whether L1s are overvalued.

The real question is:

What kind of entity is an L1 supposed to be?

Because different entities deserve radically different valuation models.

Santiago is correct on one critical point:

We have invested over $100 billion in infrastructure, and blockspace is no longer scarce.

But what follows from that observation is more dangerous than it appears.

To remain competitive, most L1s — Ethereum included — have aggressively subsidized transaction costs, collapsing fees to near-zero. This was not organic efficiency. It was predatory pricing.

We are now in a generalized dumping phase across crypto infrastructure.

This is not unlike what happened in:

• Airlines

• Telecoms

• Cloud infrastructure

Industries where:

• Capacity outpaced demand

• Competition centered on price

• Margins structurally collapsed

If L1s define themselves as commodity compute providers, then Santiago is absolutely right: price-to-sales is the correct metric — and valuations are indefensible.

In that world, L1s don’t become Amazon.
They become telcos.

And telcos never captured the value of the internet.

Both sides invoke Amazon. Both sides misuse it.

Amazon never:

• Generated massive revenue early

• Then deliberately collapsed pricing

• While losing monetization power

Ethereum did.

At its peak, Ethereum generated ~$10 billion in annualized revenue — not projections, not expectations, but realized fees — at a far earlier stage of adoption.

This matters.

Amazon never experienced a phase where it was too profitable to remain competitive.

Ethereum did.

And in response, Ethereum chose to suppress its own revenue to preserve ecosystem growth.

That makes Ethereum fundamentally unlike Amazon — and unlike almost any tech company.

This is where the debate needs a new conceptual frame.

Ethereum is not:

• A SaaS company

• A cloud provider

• A traditional platform

Ethereum is closer to something historically unprecedented:

An investable, open-source, monetary jurisdiction.

This is what might best be described as Open Source Capitalism.

Ethereum accidentally discovered something no open-source project before it ever achieved:

• A native currency

• A credible monetary policy

• A capital market that prices governance decisions in real time

Linux never had that.
HTTP never had that.
SMTP never had that.

Ethereum does.

But here lies the danger.

Ethereum still behaves culturally like Linux — not like a state.

Santiago warns that margins in competitive industries go to zero.

That is true — for infrastructure.

But jurisdictions are not infrastructure.

Countries do not compete primarily on transaction costs.
They compete on:

• Legal certainty

• Monetary credibility

• Security guarantees

• Institutional trust

• Capital protection

And critically:

They issue currency.

This is where the “city” analogy breaks down.

Cities don’t issue money.
Countries do.

Ethereum is far closer to a monetary state than to a city or a cloud provider.

And yet, Ethereum’s strategy increasingly treats ETH like a utility token, not a sovereign currency.

That is why monetary premium is collapsing.

Today, ETH is often:

• Used briefly

• Immediately sold

• Held minimally

That is not how currencies of economic regions function.

In real jurisdictions:

• Economic actors must hold balances

• Obligations are denominated in the native currency

• Monetary demand is structural, not transactional

When ETH loses that role, valuation collapses into:

• Fee multiples

• Yield narratives

• Speculative optionality

Which is exactly the Cisco scenario Santiago fears.

One of the most misleading claims in the debate is:

“No one uses this other than speculation.”

That statement fundamentally misunderstands finance.

Speculation is not a flaw.
It is the coordination layer of capital.

Price discovery, liquidity, leverage, and risk transfer are among the most value-creating mechanisms in modern economies.

Every developed nation correlates financial depth with GDP growth.

The issue is not speculation.

The issue is who captures its value.

Santiago argues — correctly — that user aggregators capture value.

But there is a deeper layer:

Jurisdictions are the final aggregators.

Apple captures value not only because it controls users — but because it controls:

• Distribution

• Rules

• Enforcement

• Currency (indirectly, via pricing power)

If L1s abdicate governance, monetary policy, and economic capture, then yes — value migrates upward.

But that is a strategic choice, not an inevitability.

This debate is not about whether L1s are expensive.

It is about which category each L1 chooses to belong to:

• Competes on price

• Valued on revenue multiples

• Margins compress

• Becomes AWS or a telco

• Capture monetary premium

• Price governance, security, and trust

• Compete on institutional quality

• Valued like sovereign assets, not companies

The market is currently unable to distinguish between these two.

And many L1 teams are making that confusion worse.

To Santiago:

If Ethereum is merely infrastructure, why did it ever generate $10B in revenue — and why would a rational infrastructure provider voluntarily destroy that capacity?

To Haseeb:

If Ethereum is a jurisdiction, why does it continue to marginalize financial strategy, monetary premium, and economic capture as secondary concerns?

Because a state that refuses to collect sustainable taxes eventually collapses — no matter how open-source its ideology.

Ethereum is not “overvalued” in isolation.

It is strategically unresolved.

If it becomes a global digital jurisdiction with a credible monetary role, it may be closer to the dollar than to Cisco.

If it continues to behave like subsidized infrastructure, it will be priced like one.

Markets are not dumb.

They are waiting.

And eventually, they will force the answer.