AI agents carrying out financial transactions on blockchain networks could challenge the assumption that Layer 1 block space is effectively unlimited, Avalanche Treasury Co. chief executive Bart Smith has warned.
Speaking at the New York Avalanche Summit, Smith said autonomous software could generate sustained onchain activity if adoption reaches even the lower end of current market estimates.
AI agents can follow instructions, use software and complete tasks with limited human involvement. In financial markets, that could include placing trades, moving funds, settling payments and managing positions. Each transaction would compete for available network capacity.
“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.”
Smith did not give an estimate for transaction growth or a date when demand might exceed capacity. His argument depends on AI agents becoming widely used in financial markets, creating continuous activity rather than occasional experiments.
He said growing demand would also make differences between Avalanche, Solana and Ethereum more significant. Those networks vary in areas including transaction speed, fees, finality, privacy and the ability to build systems for particular business requirements.
“Theoretically, there are many subtle differences between these L1s,” Smith said. He added that users could currently overlook many of them while capacity remained readily available, but “these differences will become important” under heavier demand.
Smith highlighted privacy and security as areas where he believes Avalanche is suited to business applications. The network’s separate Layer 1 environments can be configured for specific operational and compliance requirements.
On Sep. 14, Avalanche was selected for the UAEPASS Digital Vault, a document service within the United Arab Emirates’ national identity platform. UAEPASS has 12.5 million users and links them to more than 15,000 services provided by more than 350 public and private organisations.
Deca4 and Ava Labs said the vault would use cryptographic records to confirm that documents had not been changed, while keeping their personal contents offchain. The Telecommunications and Digital Government Regulatory Authority oversees the service, Deca4 is responsible for local implementation, and Ava Labs is providing Avalanche infrastructure and technical support.
In September, Hanwha Investment & Securities completed a tokenized securities platform supporting Avalanche ahead of South Korea’s regulated security-token market, which is scheduled to begin in February 2027. Seoul Economic Daily reported that the platform would manage the issuance and distribution of tokenized securities.
Smith also forecast that traditional financial markets could operate 24 hours a day, five days a week, by mid-2027. He said existing systems were not designed for continuous trading and settlement.
“New infrastructure must be created,” Smith said, adding that it would be built “on the blockchain” rather than using the old model.
That shift would require clearing, settlement, collateral and risk systems to run continuously, while AI agents could make automated decisions across time zones.
Avalanche’s institutional activity includes tokenized real-world assets. RWA.xyz data cited by crypto.news showed their value on the network reached $2.1 billion in July, after rising 60.47% in 30 days. Bridgetower said it had placed more than $11 billion in production-linked assets on Avalanche using Chainlink infrastructure, including the Arizona Copper-Gold project. BlackRock’s BUIDL tokenized US Treasury fund had also exceeded $900 million on Avalanche at the time.
Franklin Templeton and VanEck have used, or announced plans involving, Avalanche-based products.
Smith leads Avalanche Treasury Co., which began trading on Nasdaq under the AVAT ticker in June after merging with Mountain Lake Acquisition Corp. The transaction valued the company at about $675 million and gave it roughly 15 million AVAX, around 3.5% of circulating supply at the time.
AVAT closed 38.13% lower at $1.85 in its first session, having opened at $2.99. About 497,580 shares changed hands and its market value was near $486.37 million.
“It is not a bet on price,” Smith said, describing the company as an ecosystem investment vehicle rather than a passive token holder.
Its holdings nevertheless leave it exposed to AVAX price movements. Its board and advisers include Ava Labs founder Emin Gun Sirer and Aave founder Stani Kulechov. Backers include Dragonfly, ParaFi Capital, VanEck, Galaxy Digital, Pantera Capital, CoinFund, Kraken, FalconX and Borderless.
Smith previously spent nearly 14 years at Susquehanna in institutional trading and digital assets.
