AI Agents Set to Strain L1 Capacity
Bart Smith, the chief executive of Avalanche Treasury Company, stated that the entry of artificial intelligence agents into financial markets will create a demand for blockchain blockspace that current networks cannot sustain. Speaking at the Avalanche Summit in New York on Wednesday, Smith argued that the era of effectively unlimited blockspace is ending.
“If we hit any of the low-end expectations of what agentic activity is going to happen as AI gets into financial markets, all of that’s going to be on blockchains too,” Smith said. “There’s not enough block space. And block space is not infinite anymore.”
Smith, who previously served as the CEO of Susquehanna Crypto for nearly 14 years, predicted that the technical distinctions between major Layer 1 networks will become significantly more consequential as capacity constraints tighten. He noted that users currently do not need to pay much attention to the nuanced differences between chains because available capacity is plentiful.
“There are all of these nuanced differences, in a theoretical world, between Solana, Avalanche, Ethereum, other L1s,” Smith said. “Those differences are going to matter.”
Shift to 24/5 Trading Expected by 2027
In addition to AI-driven activity, Smith outlined a projected shift in traditional financial market operating hours. He expects traditional financial markets to transition to a schedule of 24 hours a day, five days a week by the middle of 2027.
Smith argued that existing financial infrastructure is not designed to handle the continuous processing required for around-the-clock trading. He posited that this transition will necessitate the construction of new systems that leverage blockchain technology rather than traditional centralized clearinghouses.
“You’re going to have to create a new infrastructure, and you’re not going to build that infrastructure the old way,” Smith said. “You’re gonna build it on blockchains.”
Strategic Focus on Privacy and Security
While discussing the competitive landscape among Layer 1 protocols, Smith highlighted specific use cases where different chains may excel. He stated that Avalanche is best suited for business applications that require a high degree of privacy and security.
The comments were made during an interview conducted by Gareth Jenkinson from The Block. Smith’s remarks come as blockchain networks continue to compete for institutional adoption and real-world asset tokenization, with capacity and throughput becoming key differentiators in a market increasingly driven by automated trading algorithms.
Why It Matters
The assertion that blockspace is becoming a scarce resource shifts the focus for institutional investors from speculative token value to underlying network utility and technical performance. If AI agents drive transaction volumes beyond current network capacities, the choice of Layer 1 protocol will directly impact execution costs and reliability for automated trading systems. This dynamic could accelerate the migration of traditional financial infrastructure onto blockchain networks by mid-2027.
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