What is most likely to become the moat of smart contract L1/L2 blockchains over the longer term? Assuming network effects are a given for a blockchain that is able to scale; where will the defensible value be created?

• Technology: faster and cheaper transactions that can scale to 1 billion+ users?
• Community: teams building (on top of each other) a wide range of dapps?

2021 showed us we live in a multi-chain reality. Several L1s saw great traction in the past months.

This begs the question: How defensible is Ethereum’s ecosystem? Which components of the network provide a competitive lever? Will Ethereum L1 chains remain the dominant general purpose blockchain, in spite of higher fees and slower TPS as we move to a roll-up centric world?

Given the pace of innovation, newer chains appear to beat ETH on those aspects, although one can counter that ETH is more decentralized. Leaving values aside, newer L1s are showing signs of superior engineering.

Where ETH remains the strongest is the ecosystem of dapps that have been built on top the protocol. This is what attracts money, attention, users, and builders, in turn driving more transactions on the the network.

Blockchain technology will become commoditized. Beyond a certain threshold of speed, fees and decentralization, any improvements will see decreasing value to users. I’m will to bet that in a few years we might well live in a world where there are many chains that perform on a similar level, all of them finding meaningful adoption. They will be interchangeable. Users won’t know and won’t care which blockchain is being used in under the hood. The brand value of a chain won’t come from technical prowess. Block space availability will not remain as scarce as it is today.

BUT here’s the thing: People, i.e. users and developers, can’t spend their time and attention in many places at once. Attention is the scarcest resource. We can’t shard it, we can’t scale it with L2s. Humans can only spend a finite amount of their attention is one place at the time.

They will go to the network where they get the most utility. They won’t want to switch once they formed a specific habit around a chain. Especially when a network’s value is seeing strong network effects.

Attention is scarce, computing is abundant. Attention is largely fixed, blockchains get faster every year. Attention can’t be forked, protocols can. For those reasons, I put ecosystem ahead of technology.

But the reality isn’t neatly black and white. Technology does enable new use cases that wouldn’t be possible in the past. Interoperability across protocols is also key in driving utility, which in turn drives network effects.