Last year, talk heated up around so-called “smart contract platform fragmentation.” Espoused by the likes of Polychain Capital founder Olaf Carlson-Wee, the concept dealt with how competing smart contract platforms might respectively achieve popularity in different regions for various reasons.
While the cryptoeconomy is still young, Ethereum has generally proven to be a bulwark against such fragmentation to date, having held its ground as the go-to smart contract platform thus far.
Of course, it’s not that interesting things aren’t happening on other platforms, or that platform fragmentation can’t still intensify. It’s just that Ethereum has established a network effect that seemingly grows into a bigger advantage every day.
As of last month, Ethereum had approximately four times as many developers as the crypto ecosystem’s next largest development community, Bitcoin. Roughly speaking, that means almost 20 percent of all cryptocurrency developers are working around ETH. And some projects like Synthetix have walked back work on other platforms, in their case EOS, to work exclusively on Ethereum.
It’s against this backdrop that Joel Monégro, a partner at cryptocurrency venture capital firm Placeholder, published on article on September 3rd dubbed “Ethereum and the Seven Dwarfs.” Therein, Monégro notably made a case for why the reigning smart contract platform was like tech giant IBM in the smart contract arena.
Monégro: Network Effect Big for Ethereum Like It Was for IBM
The Placeholder partner started out by explaining the phrase “IBM and the Seven Dwarfs,” which was popularized decades ago to suggest just how far behind other computer makers of the day lagged behind IBM.
— Placeholder (@placeholdervc) September 3, 2019
His point? Ethereum now seemingly finds itself in a similar dynamic, insofar as its network effect is so far out ahead of other networks presently.
“Ethereum is the IBM of the smart contract blockchains: it may not be the ‘best’ technology, but it works well enough and has amassed a distribution advantage that will be hard to overcome by its competitors,” Monégro wrote near the start of his piece.
The Placeholder partner later added:
“Building a large developer community is hard. Getting them to build apps is hard, successful ones even harder. Plugging into the mainstream consciousness and onboarding users is hard. Developing network self-sovereignty is hard. And even if you’re excellent at every single one of those, at the very least it takes time, and lots of it. And you’ll be chasing a moving target because Ethereum will continue to grow in the meantime.”
Monégro went on to say that such observations weren’t mean to be an ax against other projects, but rather merely that Ethereum seemed poised to keep its top position in the market “for at least the medium term,” like IBM did back in the day.
What’s a Project to Do?
People can agree or disagree on Monégro’s projection, to be sure.
And Ethereum’s current “dwarfs” may go on to create great value for people just like many of IBM’s “dwarfs” did. But if Monégro’s aforementioned estimation bears out for the foreseeable future, it will have big implications for the newer wave of smart contract projects like Algorand, Cosmos, and Polkadot.
Namely, it will entail the builders and communities of these fledgling networks continuously contending with Ethereum as a massive elelphant in the room. All projects have their own strategy for doing so. For example, Polkadot and Cosmos are heavily focusing on interoperability, which is important and useful work. But will the nuance be enough to bridge the gap with Ethereum’s lead? And does it matter?
Maybe, maybe not. But it’s clear who’s king of the smart contract hill for now.
“[W]hen it comes to the top, in terms of size, scale and impact, ETH looks a lot like the IBM of our era,” Monégro accordingly concluded his Tuesday piece.