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Ethereum Has Something The Others Don’t

The Smart Contract Race Is About More Than Network Fees and Scalability

I have spent the last several months taking a quantitative look at smart contract platforms by scoring and ranking them based on network value, developer activity, number of transactions and Dapp activity. I wanted to take an objective look at which layer one protocols were winning, and more importantly, by how much.

While informative, this exercise was missing something. There is a subjective, emotional side of the battle between smart contract platforms, one based on principles. It is not just about usage, token price or developer activity.

“In the smart contract wars, ideology matters.”

In the book “The Starfish and the Spider,” authors Ori Brafman and Rod Beckstrom argue that decentralized networks — starfish — are more powerful than centralized hierarchies — spiders. They describe decentralized networks as having 5 important attributes, one of which is ideology. In their view, ideology is the glue that holds decentralized organizations together. Because of a common and unshakable belief, participants are highly motivated to adapt and progress a decentralized organization’s goals because they believe whole-heartedly in their values.

Brafman and Beckstrom use Alcoholics Anonymous as an example. This organization, founded by Bill Wilson in 1935, was created with the purpose, according to Wikipedia, of enabling members to “stay sober and help other alcoholics achieve sobriety.” Wilson did not create a formal corporation to fulfill its purpose; instead, he established an ideology — the 12 steps — and made it available openly to anyone who wanted to start a chapter. AA has an estimated two million members, making it one of the most successful decentralized organizations of modern times.

Decentralization is the ideology at the heart of the blockchain movement. Satoshi created Bitcoin as a trustless, censorship resistant means of value exchange. Interest in Bitcoin is not based only on utility, which until recently was quite limited. People are interested because they believe in what Bitcoin stands for. There are plenty of crypto tokens claiming the same or more utility, but belief in Bitcoin’s ideology is a differentiator that drives its huge community toward innovation and adoption.

The smart contract wars are no different. The large price swings of ETH this year have renewed the public’s interest in Ethereum. It has also increased the awareness of competing platforms known as “Ethereum Killers” because of fluctuating gas fees and network bandwidth constraints. Platforms like Solana and Cardano have seen public interest, press (and token price) rise precipitously since the start of the year.

As expected, the talking heads for these platforms point to their increased scalability and tiny transaction fees as the main contrast to Ethereum. While Ethereum 2.0 and their Proof-of-Stake consensus are 12–36 months away, they argue, their platforms are ready to scale today.

Of course, these competing platforms achieve their scale by making tradeoffs on how nodes achieve consensus. For example, Solana has a more stringent set of hardware requirements to be a validating node, which creates some limitations on which computers can participate in the network. Cardano handles validation through staking “pools”, where token holders can group their stake together to validate transactions. While there are roughly 2200 pools, they’re owned by only 150 entities, and ADA holders must trust the pool operator with their stake.

When asked about the concerns these platforms might not be fully decentralized, the response usually focuses on pragmatism. The advocates of the competing platforms argue we have to balance the purist interpretation of “decentralized” with the need to scale. A reduced number of nodes or a concentration of validators might not be fully decentralized, but it is enough to be censorship-resistant while achieving scale and low cost.

This argument has merit, but those who espouse a pragmatic view of the decentralization debate would do well to heed the lessons from Brafman and Beckstrom. Utility alone won’t allow a smart contract platform to win the race. Ethereum has something the Solanas and Cardanos of the world cannot claim — unwavering commitment to the ideology of decentralization. Ethereum’s roughly 8000 nodes require no special hardware to participate, and they are not broken down into smaller groups of validators — each nodes validates every transaction.

The true believers won't scale, low fees, AND no compromises on decentralization. The uncompromising belief in this ideology is driving significant amounts of adaptability and innovation. As a result, we are seeing more than just the carefully crafted Roadmap to Ethereum 2.0. With Optimize & Polygon, we’re already seeing rapid improvements to layer 2 solutions that are already having a positive impact on bandwidth and network fees.

Of course, there is tremendous innovation happening in many of the smart contract platforms. That is why the space is so exciting. But when push comes to shove, and each platform has acceptable metrics, from Dapps to token price to throughput, which X-factor will propel the winning platforms ahead of the others? My money is on the one driven most enthusiastically by ideology. And right now, that looks a lot like Ethereum.



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Chad Hahn

Husband, father of 3 boys, 2 time entrepreneur, tech enthusiast (esp blockchain), yellow Whole Brain thinker and supporter of under-served communities