At the end of this month (July) the Ethereum Public Blockchain will be 10 years old. An excessive amount of time in the world of Crypto is spent discussing whether Ethereum will succeed and will become the basis for the next iteration of global trade and finances. All this speculation is wasted effort. Ethereum has already won. The losers just don’t know yet.
You can be tempted to take my opinion because I am a notorious ETH “Maxi” and has now been just over ten years. Hear me anyway.
Note: Yes. Real. More than ten years. Vitalik Buterin started me with Ethereum and in my earlier incarnation as IBM director, I showed IBM’s first trip in Blockchain technology in CES in January 2015. That is a story for another day, but I have been here since the beginning.
Blockchains are primarily technology platforms. We talk about them as if they are financial systems, but they behave and they grow, just like technology platforms. And if we look at the history of technology platforms, we can see some clear patterns that tend to follow Ethereum.
First, it is a winner-take-all-all business. IBM has 100% of the Mainframe software companies. Windows has 90% of desktops. Android comprises approximately 90% of all smartphones. TCP/IP is approximately 99.9% of all network traffic.
This pattern repeats itself because computer platforms have two factors for a winner-take-all business model. First, zero marginal costs of adding users. Every extra user costs almost nothing, so that networks can add new users for free.
Secondly, network effects mean that more users make networks more valuable and as a result it is extremely difficult (but not impossible) for Laggards to catch up with the leaders.
In the early days of platform development it is often easy for winners to come and go. Network effects are not large enough and better products can sweep aside earlier leaders. We saw this early in the world of PC and mobile devices as early leaders (Apple II, Commodore 64 and later with Nokia and Blackberry smartphones) were swept aside by impressive new platforms.
In all those cases, however, the “Type” platform itself was very new (less than a decade old) and wide adoption was also relatively low (less than 10% of the public). With the official 10th anniversary of Ethereum, we have both passed statistics. According to many accounts, more than 20% of the American population now has crypto and blockchain platforms more than ten years old.
From a technological point of view, better block chains than Ethereum are there. One of the basic lessons of global standards is this: the best technology never wins. From video cassettes to DVDs to mobile computer use, platforms get grip when they become “good enough” for a certain set of use cases such as payments from NFTs. Many of the most successful platforms never really solve all their important problems and they are often achieved with shoe in use scenarios for which they were never really intended.
An example: the internet itself is never designed for speech and video and has never really solved problems with quality of service management. But it’s good enough and we all have it, so that’s how we call nowadays.
Yes, but?
So if Ethereum really won, you might ask questions, why are there so many other thriving blockchain ecosystems? I think there are two answers.
First, large network and technology leadership do not happen immediately. They take years to manifest themselves completely and in the fog of the battle, it can be difficult to see who pulls ahead.
With the transition from Ethereum to proof-of-stake and the creation of the L2 ecosystem, it is clear that the network has seen its biggest challengers and steadily produces an already dominant position. Number two players will come and go, but turning back the dominance of Ethereum now looks almost impossible.
For a long time Ethereum had a share of almost 100% in the Smart Contract Ecosystem. While other chains came online, the share of Ethereum in important measures such as the Defi Ecosystem fell considerably, by around 50% in 2023. Since then it has been stabilized and started to rise again, fed by the success of the L2 ECO system. No other only ecosystem even has a 10% share in the total market.
This is not an unusual pattern. Microsoft Windows became the largest desktop computer platform in 1984 after a bright fight in a busy market. At that time it was still confronted with intense competition from Commodore, Atari, Apple and others. Subsequently, Commodore, Atari and the Apple II remained sold until well into the nineties. BlackBerry Sales continued to rise for the first two years that the iPhone was available. Only the Mac survived the long-term PC competition.
The Exitpad was even longer in the Mainframe -Business. IBM came to dominate the Mainframe company after the release of the system/360 in 1964. Unisys, IBM’s last global competitor created by the merger of Burroughs and Sperry (of Univac Fame), produced their last Hardware Mainframe in 2015.
Secondly, the structure of the blockchain ecosystem itself will further expand the “shelf life” of those networks that were unable to get a grip. Most of these are run by foundations, no companies. As such, there are no shareholders who can demand a return on their capital. Consequently, there is no real exit pressure on chains that were not successful. Expect that they will continue to release small updates and mountains of Ethereum-related-related groups on X for the near future.
If there is one last lesson that we have to follow from the world of technological standards, it is this: once locked up in place, it is amazingly difficult and extremely rare for the leaders to lose their first place. Windows has been the winner on the desktop since 1984. IBM has won the data center since 1964. I am willing to bet that Ethereum will still be the leading blockchain ecosystem of the world in 50 years.
Disclaimer: These are the personal views of the author and do not represent the views of EY.