Thread by @tannedoaksprout

ethereum will retain dominance in this early, exploratory, meme/retail market.

but i have near-ZERO confidence that it remains the heart of crypto. i predict this will be empirically obvious by the next bull run.

why?

"specialization breeds optimization" — @rphmeier

👇🏽

https://twitter.com/redphonecrypto/status/1294814946501558272

nb: i mostly write this shit for myself. have made a bit of an effort to compress for twitter, but if you can't be bothered to parse it, i don't actually gaf.

i tag projects to increase reach and feedback to boost my own mental models.

one of the most important questions in designing base layers is –

- what functionality runs at the base layer?
- how much does each function cost?
- who decides on these changes?
- who decides when and how these changes are rolled out?

because the crypto industry is so new, these questions have taken a back seat to projects that have prioritized speed, delivery and ease of experimentation over long-term efficiency.

ethereum provides delivery speed through
- composability of assets, functionality
- good base layer security
- good-enough tooling and ux

these advantages are being eaten

- xchain composability en route – see ibc, thorchain, xcmp

- shared security en route – projects like $band are bootstrapping node security - eth counterparts proven scale

- tooling/UX is an engineering problem – i.e. solved with time & money

so assume these issues are all solved and that core architectures and features have been discovered.

what becomes the concern for devs
next? (make no mistake – devs are the customers of protocols)

in a word – efficiency.

devs will ask themselves – how can i compete?

my assertion is that app-chains will win-out long-run because they'll provide far cheaper services than can be built on #ethereum and integrated l1s like @solana and @NEARProtocol.

but concretely, why?

in summary, because they provide greater sovereignty which enables more specialization and stability, more optimization and cheaper services to the end user.

this wins because end users will, on average, be attracted to apps which give them the best rates.

so the devs of those apps will build on the chains which provide the cheapest services.

so how does this actually work?

the main thing to understand is that ethereum has control over the base layer.

#ethereum governance decides—

- what functionality is available at the base layer
- what each function costs
- who is involved in governance
- when upgrades happen

i don't have time to drill into each, but consider these 3 points—

1/3 do you really think a base layer for general-purpose operation is going to be more efficient than one optimized per app?

app-specific chains can literally make certain functions and automations *free*

2/3 consider that liquidation, arbitrage, price feed updates – automated functionality – which currently need to be incentivized off-chain can now suddenly be built-in

big moolah moolah savings

3/3 what are the chances that system-wide updates to general-purpose base layers are going to be well-timed for all the applications on top?

eth updates will happen, and they will fuck you over

all of these things add up to app-chains having far greater predictability, stability and overall efficiency.

don't get me wrong, i think applications of a certain scale will probably still find a home on general l1s like ethereum.

but the idea that protocols which will reach global scale won't seek maximum efficiency through sovereignty and specialization is *ridiculous*.

i'm not looking for fluffy positivity or to play games with the twitter algo.

please tell me why i'm wrong here or in DM. or expand on what i'm saying.