XYO today announced the migration of its network from Ethereum-based Layer 2 chains to its own purpose-built Layer 1 blockchain. The move marks a defining evolution for a protocol that was DePIN before the term even entered the crypto lexicon.
The newly launched XYO Layer One (XL1), currently live in public beta, is designed to serve as the high-throughput backbone of XYO’s expanding ecosystem—one that now spans artificial intelligence, real-world asset (RWA) tokenization, and geolocation data validation. This strategic shift also introduces a dual-token architecture, pairing the legacy deflationary XYO token with a new inflationary asset, XL1, optimized for high-frequency blockchain operations.
From Ethereum to XL1: Why the Move?
Founded in 2018, XYO became one of the earliest large-scale implementations of a DePIN network, designed to verify real-world data with over 8 million nodes already in operation. It pioneered mechanisms like Proof of Location and Proof of Origin, and launched the widely-used COIN app to incentivize participation from outside the crypto-native crowd—over 80% of its user base today is non-crypto native.
But Ethereum’s scalability limitations, even on Layer 2 networks, eventually proved to be a bottleneck.
“Having developed on blockchain for years, I’ve seen firsthand where the current systems fall short,” said Arie Trouw, XYO Co-Founder and CEO of XY Labs. “The community is ready for a system that can handle both high volumes of data and maintain true decentralization.”
XL1 is built to meet those demands. It supports multichain capabilities while introducing an innovative consensus mechanism dubbed Proof of Perfect. Rather than relying on resource-heavy consensus methods, Proof of Perfect allows decentralized nodes to select the most “perfect” chain tip—determined by validity, recency, and protocol alignment—without processing the full chain history. This design promises rapid finality and scalable consensus suitable for real-time data-intensive applications.
Performance-Driven Architecture for Data and AI
Unlike traditional blockchains where nodes must store and process the full history of transactions, XL1 leverages lookback windowing. This drastically trims active storage requirements by narrowing each node’s memory focus to recent blocks. Older data is archived but still accessible, creating a leaner and faster network without compromising data integrity.
This architecture is a boon for applications across AI, DePIN, and RWA verticals where latency and computational cost often become limiting factors. Early discussions with prospective data-driven builders are already underway, signaling developer interest in a lightweight yet high-performance blockchain infrastructure.
Governance Meets Utility: A Dual-Token System
XYO’s transition to its own Layer 1 chain also heralds a shift in tokenomics. While the original XYO token will retain its governance, staking, and long-term value-preservation functions, a new inflationary token—XL1—has been introduced as the operational fuel of the new blockchain.
Where XYO provides protocol alignment and security, XL1 will handle the day-to-day transactional needs of the network. It will be used to pay for gas, execute smart contracts, and compensate validators and efficiency nodes. Importantly, XL1 will be generated through staking XYO tokens, thereby locking a substantial portion of XYO’s supply and reinforcing its relevance in the Layer 1’s long-term governance.
The dual-token system enables XYO to decouple high-throughput operational demands from governance. It’s a clear separation of concerns that optimizes the network for both scale and sustainability.
The approach mirrors emerging trends in blockchain architecture where base-layer governance and transactional throughput are increasingly segregated to enhance network design—seen in ecosystems like Cosmos and Polkadot, though with XYO’s distinct twist tied to real-world data.
Regulated and Ready: A Compliance-Focused Framework
XYO is no stranger to regulatory milestones. Its parent firm, XY Labs, was the first crypto company in the U.S. to receive SEC approval for a Regulation A offering, enabling both accredited and non-accredited investors to participate. Moreover, it was among the first to tokenize and list its shares, now trading under the symbol XYLB on tZERO ATS, a FINRA-registered alternative trading system.
This regulatory groundwork positions XYO and XL1 as compelling infrastructure for RWA initiatives where compliance and traceability are non-negotiable. As tokenized assets—ranging from real estate to supply chain data—gain traction in 2025, networks like XL1 could emerge as critical middleware for secure, compliant, and data-rich asset transfer.
What It Means for the Broader DePIN and AI Ecosystem
XYO’s migration comes at a pivotal moment for the decentralized physical infrastructure space. As AI models increasingly depend on real-world data sources and physical verification for training, DePIN platforms are gaining institutional attention. However, many existing chains remain ill-suited to the throughput and latency demands of such applications.
By pioneering Proof of Perfect and optimizing storage through lookback windows, XYO Layer One positions itself as an infrastructure layer capable of supporting next-gen decentralized networks. Coupled with a tokenomic model that aligns governance with performance incentives, the platform offers a blueprint for data-driven ecosystems that demand both scale and integrity.
Read Also: XYO Launches Native OS, Democratizing a Sovereign Internet
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Image Credits: XYO