Rising threats to Ethereum’s first mover advantage
MetaCartel DAO Genesis Paper Pt.1
Ethereum has undeniably the most collaborative Web 3.0 ecosystem with an encouraging culture of innovation. In our view, it is arguably one of the best chances, and potentially one of the only few projects that could lead to us realizing the vision of Web 3.0 — a capture resistant internet of open value.
Emerging threats to Ethereum’s first-mover advantage
The inception of Ethereum nearly four years ago has since then galvanized an entirely new wave of interest in the possibility of building a decentralized internet. Similar to how Bitcoin validated the existence of a peer to peer financial system, the inception of Ethereum four years ago galvanized an entirely new wave of interest in building a decentralized internet. Ethereum’s technologies open up entirely new spectrums of understanding around Decentralized Autonomous Organisations (DAOs) and technology governance. The project sparks deep questions behind the meaning of data ownership and cultural virality through concepts such as NFTs (re: Cryptokitties). Large scale autonomous financial systems such as MakerDAO push the boundaries of what is possible in decentralized financial and economic systems. The ICO craze of 2017 gave us a glimpse into the power of decentralized finance tools and the potential human capital unlocked by permissionless access and control of wealth. ETHResear.ch forums continue to expand on the diverse and deeply impactful possibilities held in the network’s potential.
ETHGlobal and the Ethereum Magicians went on to onboard and catalyze a global community of developers around the world, fostering the movement behind Ethereum, which could potentially become later recognized as one of modern history’s greatest feats of human coordination. Its narrative is far from being complete and instead, it is simply just the beginning for the technology and for the community rallied behind it.
In spite of the progress made by Ethereum four years after its launch, the technology has yet to make a significant tangible impact in the world on a grand scale. While Ethereum was one of the first projects to launch with a mission of creating a decentralized internet of value, it didn’t take long for other competing platforms to emerge with the goal in setting out to build a decentralized internet, each respectively competing to some extent with Ethereum on the market share of developer adoption, value creation, and user adoption. The community has yet to materialize and prove significant value on the application layer, despite Ethereum’s first mover advantage and strong ideological following. The vision of Ethereum is threatened by the competing force of other L1 blockchains that are aggressively pursuing the discovery of end-user value creation and mass adoption with decentralized applications (dapps).
While other L1 blockchain developer communities are feeble in comparison, these ecosystems, as well as established technology titans such as Samsung and Facebook, are ruthlessly pursuing user value discovery on the application layer in achieving mass adoption. This, in turn, would signal value and potentially snowball developer adoption in favor of whichever platform accrues the most value, has the most users, has the fastest growing companies and the most sustainable projects. Ethereum’s competitors are ruthlessly prioritized to do so, where it is exampled through their resource allocation towards the development of dapps through venture funding. This is especially prevalent with established companies such as Facebook which already achieved mass adoption and are poised with global distribution. Recently, these developments have been accelerating…
- In early 2018, when EOS raised $4 Billion dollars, they announced their plans of re-investing at least $1 Billion dollars of their raise towards setting up their own VC to fund EOS dapps.
- Coinbase with $1.3 Billion in revenue in Oct 2018 raised $300 Million and rose to a valuation of $8 Billion, investors include a16z and Polychain Capital.
- Not long after also in late 2018, after acquiring BitTorrent, Tron Foundation set up to launch a $100 Million Fund aimed to grow and fund gaming dapps on their platform.
- And in early 2019, Ripple announced a $100 Million fund in partnership with Forte, an a16z backed venture focused on building games with the XRP token.
- Facebook recently has released plans to launch their own cryptocurrency in the first half of 2019, having recently acquired a blockchains startup know as Chainspace. Alongside their efforts to hire a blockchain engineering team.
- On the 18th April 2019, Binance launched their DEX on their own native blockchain known as Binance Chain, a use case first blockchain strategy focusing on product market fit.
- Polkadot which looks to launch in Q3 2019 aims to raise an additional $60 Million through a second token offering.
- Cosmos, a blockchain 5 years in development launched in Q1 2019, reaching rapid adoption of its technologies and has already gained rapid user traction on the application layer through the DLive application which aims to implement sustainability fair reward economics for livestreamers, a project which PewDiePie has committed exclusivity to.
- Aragon a native Ethereum based project is exploring the migration to the Polkadot platform
Ethereum has a lot of competition, we need to inoculate ourselves now in an effort to grow into anti-fragility. With many other L1 blockchains pursuing aggressive application growth and the discovery of value with end users, where are Ethereum’s resources and energy being channeled towards?
Ethereum’s resource allocation
While there is no central resource allocating party in the Ethereum ecosystem, the resource allocation of the community has mainly been driven by the following developer narratives:
- Dapps built on Ethereum cannot scale as shown by the launch of Cryptokitties and the lack of scaling solutions at that stage.
- There is not enough developer infrastructure & tooling as shown by developer experience research conducted by ETHPrize, Fluence, and the Ethereum Magicians.
- The user experience of dapps should reach reasonable viability as indicated by the launch of MakerDAO, Augur, as well as Web 3.0 design challenges such as key management and user education.
Over the last 18 months, these narratives have been able to focus the community in solving these mission-critical problems and the ecosystem has gained a lot of ground on each respective problem. We have reached an inflection point in each of these narratives, giving way to new priorities and a shifting landscape in regards to the viability of application development on the Ethereum platform.
There is now substantial evidence that applications built on Ethereum are not only scalable but viable in all aspects, including user experience. These include Cent.co, SuperRare, SpankChain, and many more Ethereum based blockchain games that are creating real value for users today. Previously, infrastructure has hindered the progress of experimentation on the application layer, however, the tides are shifting as it is increasingly apparent that many application layer experiments and projects are beginning to thrive and find end-user value.
We, as a community have the long term figured out, this is a call to action for the short term. There is no long term if we fail in the short term future. Let’s not get complacent and assume we are going to always keep our lead. This project is positioned to fill in the gap.
In summary, the community building this paper recognizes the stage of Ethereum’s positioning as both uniquely valuable and vulnerable. No other decentralized application network will hold as robust censorship resistance, and the projects with the highest potential to succeed are those corporate structured organizations many community members feel existentially troubled by. While we know the community does great work on the backend of network development, we recognize a need to put our backend solutions to the test by kickstarting the neglected frontend.
We need to fund impact on the application layer
As infrastructure will increasingly mature in the coming years and dapps become increasingly more viable to build, in order for us to reach our goal, the Ethereum ecosystem needs to focus on creating applications that create value using web 3.0 technologies to end users. With every other L1 blockchain dedicating resources towards discovering value on the application layer, Ethereum will require coordination from R&D to application layer development to ensure it finds relevancy and product success before Facebook Coin or Tron does.
The real race is in finding & creating user value on the application layer.
A community in the ecosystem should be focused on maximizing impact around this goal. With every new innovation made on the infrastructure level, new possibilities are enabled on the application layer, opening up new ways in how dapps can create value for users. Despite every inch we gain with infrastructure, value only comes with users.
“A ship at harbor is safe, but that’s not what ships are built for.” — anon
Decrease resource allocation towards
- R&D purely based on technical merit and without validated need or interest.
Increase resource allocation towards
- Infrastructure with a high degree of signalled need by Ethereum dapps
- Startups and entrepreneurs looking to build applications using Ethereum
- Existing software or products with active users looking to integrate and use Ethereum
- End-user application layer experiments
We have the potential, and the resources, to build impactful and life changing technology and we fully believe the community is moving in that very direction. However, if we do not address and focus our application layer on end user adoption, we are on the verge of being outpaced by other L1 blockchains with significantly greater resources available than Ethereum.
Part 2 which will be released in the coming 2 weeks dives into our hypothesis on what we believe to be the key to leverage Ethereum’s strengths and counter competitors to find success on the application layer.
What we are working on…
Currently, the MetaCartel is working on a project that aims to accelerate the discovery and development of dapps that provide real value to end users.
Thanks to the MetaCartel members who have contributed to this paper (James, James, Eric, Lili) & for Helena Flack for being the final editor.