AI agents could squeeze L1 block space, Avalanche CEO says

Avalanche Treasury Co. CEO Bart Smith has warned that AI agents could strain Layer 1 block space as automated financial activity moves onchain and traditional markets adopt longer trading hours.

AI agents could test available block space

The Block reported from the New York Avalanche Summit that Smith expects autonomous agents to generate financial transactions on blockchains if their adoption reaches even the lower end of current market estimates.

AI agents can act on instructions, interact with software and complete tasks with limited human involvement. Applied to finance, such systems could place trades, move funds, settle payments or manage positions, with each onchain action competing for network capacity.

Smith argued that the resulting transaction load would challenge the common view that block space remains abundant. Existing networks can currently handle enough activity that many users do not need to consider how one Layer 1 processes transactions differently from another.

“As long as AI agent activities reach the lower end of market expectations, relevant activities will occur on the blockchain,” Smith said. “There is not enough block space, and block space is no longer infinite.”

Under Smith’s forecast, automated activity would not merely add more human users to blockchains. Software agents could operate continuously and make repeated transactions without following the working hours, sleep schedules, or manual approval processes that limit human activity.

Smith did not provide a transaction estimate or a date when demand could exceed available capacity. His claim rests on AI agents gaining enough use in financial markets to create sustained onchain activity rather than occasional tests.

L1 differences may become harder to ignore

As transaction demand rises, Smith expects users and financial firms to pay closer attention to differences among Avalanche, Solana and Ethereum. Network design affects transaction speed, fees, finality, privacy options and the ability to create systems for specific business needs.

“Theoretically, there are many subtle differences between these L1s,” Smith said, adding that users can overlook many of them while capacity remains readily available. Under heavier demand, he said, “these differences will become important.”

Smith identified privacy and security as areas where he believes Avalanche is suited to business applications. The view aligns with the network’s use of separate Layer 1 environments, which organizations can configure for specific operational and compliance needs.

Recent deployments provide examples of the business activity Smith described. On Sep. 14, Avalanche was selected as the underlying blockchain for the UAEPASS Digital Vault, a document service within the United Arab Emirates’ national identity platform.

UAEPASS serves 12.5 million users and connects them with more than 15,000 services offered by over 350 public and private organizations. Deca4 and Ava Labs said the vault would use cryptographic records to verify that documents had not been altered without putting their personal contents directly onchain.

Such a design separates document verification from the sensitive data contained in the file. The UAE’s Telecommunications and Digital Government Regulatory Authority oversees the service, Deca4 is handling local implementation, and Ava Labs is supplying Avalanche infrastructure and technical support.

Avalanche has also attracted financial firms working with tokenized assets. In September, Hanwha Investment & Securities completed a tokenized securities platform supporting Avalanche ahead of South Korea’s planned regulated security-token market.

According to Seoul Economic Daily, the platform is designed to manage issuance and distribution processes for tokenized securities. South Korea’s framework is scheduled to take effect in February 2027, giving financial firms a regulated route to represent qualifying securities on blockchain systems.

Round-the-clock markets would require new infrastructure

Smith also expects traditional financial markets to move toward continuous weekday trading. By mid-2027, he said, markets could operate 24 hours a day for five days each week, extending access far beyond the sessions followed by most stock exchanges.

Existing financial systems would struggle to support that schedule, according to Smith, because much of the infrastructure depends on set operating hours and processes that were not designed for nonstop trading and settlement.

“New infrastructure must be created,” Smith said, adding that it would not be built using the old model “but rather built on the blockchain.”

Longer trading hours could require clearing, settlement, collateral management and risk systems to operate throughout the day. In Smith’s scenario, AI agents would add another layer of activity by making automated decisions while markets remain open across different time zones.

Avalanche’s recent institutional activity has already extended beyond test transactions. In July, the network’s distributed tokenized real-world asset value reached $2.1 billion after rising 60.47% over 30 days, according to RWA.xyz data cited in a crypto.news report on its $11 billion tokenization deal with Bridgetower.

Bridgetower said it had placed more than $11 billion in production-linked assets on Avalanche using Chainlink infrastructure. The portfolio included the Arizona Copper-Gold project, while BlackRock’s BUIDL tokenized U.S. Treasury fund had passed $900 million on Avalanche at the time.

Franklin Templeton and VanEck have also used or announced plans involving Avalanche-based products. Smith’s forecast, however, concerns a later stage in which automated systems and continuously operating markets produce recurring transaction demand rather than isolated institutional deployments.

Nasdaq listing gives U.S. investors Avalanche exposure

Smith leads Avalanche Treasury Co., a U.S.-listed company that began trading on Nasdaq under the AVAT ticker in June. The listing gives American investors a way to gain exposure to the Avalanche ecosystem without directly holding AVAX.

The company reached the public market through a merger with Mountain Lake Acquisition Corp., a special-purpose acquisition company, in a transaction valued at about $675 million. At its Nasdaq debut, Avalanche Treasury held roughly 15 million AVAX, equal to about 3.5% of the token’s circulating supply at the time.

AVAT closed 38.13% lower at $1.85 in its first trading session after opening at $2.99. Trading volume reached about 497,580 shares, while the company’s market value stood near $486.37 million.

Smith said at the time that Avalanche Treasury planned to deploy capital across the network rather than operate only as a passive token holder. “It is not a bet on price,” he said, describing the business as an ecosystem investment vehicle.

The company’s structure still leaves its financial position exposed to AVAX price movements because of its token holdings. Its board and advisory group includes Ava Labs founder Emin Gün Sirer and Aave founder Stani Kulechov, while its backers include Dragonfly, ParaFi Capital, VanEck, Galaxy Digital, Pantera Capital, CoinFund, Kraken, FalconX and Borderless.

Before leading Avalanche Treasury, Smith worked at Susquehanna for nearly 14 years and held roles tied to institutional trading and digital assets. His comments at the summit connect that market background with a forecast in which continuous trading, automated financial agents, and blockchain settlement increase demand for Layer 1 capacity.