The idea that Layer 1 blockspace has become a commodity may be premature, according to Bitwise CIO Matt Hougan, who argues that institutional behavior tells a very different story.
Hougan pushed back on what he described as an “increasing view in crypto that L1 block space is a commodity.
Institutional capital clusters in top chains while on-chain predictive markets redefine the information edge
According to the director of Bitwise, if infrastructure were truly commoditized, capital and development would be distributed evenly across chains.
Instead, the vast majority of institution building takes place on very few chains (Ethereum, Solana, etc.).
“…basically no interest in building on the twentieth largest L1,” he explained.
Networks like Ethereum and Solana continue to dominate the mindshare, liquidity, and developer businesses, even as newer Layer 1 networks compete aggressively on fees and throughput. Hougan offered a simpler explanation for the current low-wage environment.
“Top-tier L1s have built more bandwidth than the market can currently use, so costs are at rock bottom.”
However, he warned that the current balance may not last.
“The real question is what happens when demand increases as stablecoins/tokenization/DeFi grows into the trillions,” he wrote. “I’m not sure we know the answer yet.”
As the blockchain-based financial infrastructure expands to support trillions of dollars of tokenized assets and on-chain settlement, the current overcapacity could quickly diminish. Such an outcome could potentially reshape the economics of leading networks.
Prediction markets as a ‘Reg FD for the internet age’, argues Hougan
In addition to infrastructure, Hougan also addressed another controversial topic: insider trading concerns surrounding crypto-based prediction markets.
“Insider trading concerns about prediction markets are effectively outdated,” he wrote. “Prediction markets are a market-based extension of Reg FD, putting us all on a level playing field.”
Regulation Fair Disclosure (Reg FD) is designed to prevent selective disclosure of material information to favored investors.
Hougan argues that prediction markets extend this principle by publicly determining the probability of major events.
He reflected on how hedge funds have historically won “alpha” during crucial legislative moments in Washington, DC, hiring lobbyists and consultants to gather private intelligence from Capitol Hill.
I believe that powerful investors have always had a huge advantage.
I was thinking about this this weekend as I reflected on how often I look to the Polymarket for the passage of the Clarity Act.
In the past, when there was significant legislation in DC that…
— Matt Hougan (@Matt_Hougan) February 22, 2026
Today, however, retail investors can track live opportunities on platforms like Polymarket, including markets tied to the potential passage of legislation like the Clarity Act.
“For liquid markets, those opportunities are probably as good or better than anything the lobby complex can provide. It’s a more level playing field,” Hougan said.
He acknowledged that risks still exist, citing the need to aggressively police insider trading in prediction markets. Yet he emphasized that the impact balance is dramatically positive and egalitarian.
Therefore, there are two debates here:
- Whether L1s are commoditized and
- Whether prediction markets enable unfair advantages
Both debates revolve around the way power is distributed in financial systems. According to Matt Hougan, the institutional concentration on top chains reflects economic reality rather than pure commoditization.
Meanwhile, open prediction markets provide a rare example where information asymmetry is actually shrinking.
The post Ethereum, Solana defies the L1 myth – Bitwise CIO sees prediction markets changing everything appeared first on BeInCrypto.