Obviously, the Web 3 space is a fiercely tribal one. I’m sure there are many reading this who have an endless spectrum of feelings about certain cryptocurrencies and will come to this site with their own loyalties and pushing their own favorite projects. Nonetheless, one of the more commonly “accepted” view that many people within the space hold (at least those who have not gone full tilt in their desire to “dethrone the kings” in favor of their favorite project) is that you should be primarily in Bitcoin and Ethereum or at least should hold these projects under the assumption that they are relative “safe havens.” To some degree I believe this is fair, but I think even this rational viewpoint overlooks the future and vision of Web 3. I believe that right now cryptocurrency, blockchain, and decentralization technologies are instead at a really interesting and complex inflection point. Let me explain.
People who are incredibly bullish on Ethereum I have found generally believe that everything that will be in the future will pretty much be built on the existing structure(s)/ecosystem(s) we have now—in other words, it’s the “it’s too late” argument that is thrown at many projects, including those like Polkadot. Many of these folks I have found use particularly (and peculiarly) the last six months of price action (this post was written in early April, 2022) as a justification for this thinking, ignoring the years of sideways price action that Bitcoin and even Ethereum experienced before the late-2020 to mid-2021 runups of both Ethereum and Bitcoin. I believe that these people are somewhat shortsighted beyond this, however, and I will explain why.
To them, as I understand it, everything is moving very fast and so fast in fact that building new kinds of structures for Web 3 (and interoperability is not just a new structure but in many ways a new concept, though it was first introduced several years ago by Cosmos) just has to either go at breakneck speed or be left behind by current adoption of the technology by existing institutions both inside and outside of Web 3. To them, the bullish case is clear for Ethereum: existing institutions and individuals both inside and outside of cryptocurrency will be basically forced to build on one of the existing kinds of structures we have now–namely Layer 1s OR Cosmos (and now Avalanche). As such, and with Ethereum being the premier Layer 1, Ethereum’s bullish case for a price well into $20k is obvious. On the other side there are people who are looking at things differently.
One alternative (but not the only way to look at it differently) is those who say “no, actually I think interoperability is going to be the future in terms of things like Cosmos and Polkadot.” This is the camp that I fall into. These folks don’t think that these types of projects (particularly Polkadot) are “too slow” and instead believe that they are building the foundations for Web 3 moving into the future. In many ways, Polkadot is pouring the concrete into Web 3s foundation at the moment, and has yet to even fully begin to build on top of it as you would build a house.
To supplement this theory, I would point also to the emergence of high value “specialty” Layer 1s. In a way, you can already see the burgeoning dominance of “specialty chains” like Luna as being evidence that this thesis is playing out. Generalized Layer 1s are becoming increasingly less attractive and exciting as folks in the industry are seeing the importance of specialized Layer 1s built atop interoperable protocols such as Cosmos and Tendermint.
Understanding the interoperability argument I think is going to be crucial going forward and I think the arguments will soon become what specific kind of interoperability exists and maybe the more subtle specializations of the “interoperability-chains” (like for PCs and gaming: Microsoft vs Apple vs Sony Playstation vs Nintendo etc). I see these becoming, just like desktop computers or gaming consoles, the “operating systems” of Web 3. I also don’t think that, like Ethereum or especially Bitcoin before it, only one of these interoperable chains will absolutely dominate/survive while others toil away into obscurity. I do in fact, at the moment, see Avalanche becoming a more gaming focused chain. Polkadot, at the moment, appears to be focused more on becoming specialized back-end systems for, and onboarding existing institutions, and thereby “onboarding” “normies” to crypto through back-end solutions. It also appears to have the most serious, “professional” teams (aka doxxed on LinkedIn) which seems in line with this. Cosmos I think has some first mover advantage, but they seem to be specialized more in onboarding chains that might otherwise be on their own within the Web 3 ecosystem–ie Ethereum Layer 2s, Exchange chains, and privacy chains. I think, especially due to things like lack of auctions (unlike even Kusama), it will become a chain that tends to attract smaller, more experimental projects within the Web 3 space in the future. It will nonetheless be a vicious battle because there is obviously some overlap between these three chains. My bet, obviously, is on Polkadot in part at least because it has a founder I believe is a visionary.
I have concerns, frankly, about those more general purpose Alt-Layer 1s and dApps built on them (meaning not on Ethereum) that are not focused on interoperability and perhaps instead on short-term gains from yield farming or forks –such as Fantom or One—or are simply ignoring the interoperability argument altogether in favor of arguments like speed, coding language, or assumed decentralization — like Cardano or Solana. Not that these chains will necessarily die, but rather that, like Litecoin and Bitcoin Cash, they will toil away until the users/founders find their lack of “playing nicely” with other chains becomes too great an impediment to ignore.
Additionally, I think, in analyzing where we are in the Web 3 journey, it’s easy to forget that right now, by all rights, we are in a “Golden Age” of development. We just passed, for example, what may be one day considered the climax (insider pun not intended) of Web 3 DeFi experimentation with Andre Cronje, one of the premier developers and creators of DeFi, creating his most advanced project yet and then abruptly quitting two weeks later.
Ironically, I don’t think that its going to be all smooth sailing in terms even within the Polkadot and Kusama ecosystems, however. I do believe that one of the challenges that Polkadot will face will be the “sibling rivalry” that has begun to develop with Kusama, and this burgeoning rivalry could be very detrimental to both ecosystems. This is additionally the case for different specialized Layer 1s within each ecosystem as well. However, although Polkadot and Kusama are sister chains and although the success of each depends in large part to the ability of the chains built on top of them to collaborate, so far—at least at this early stage—rivalry and infighting is not entirely uncommon. Perhaps, in part, this is due to the fact that so far, the technologies and ideas surrounding Web 3 and in particular DeFi—the burgeoning field so far—have been limited conceptually to yield, DEx, stablecoins, etc, and many chains have some significant overlap in terms of their stated goals and roadmaps in this sense. After all, the greatest rivalries in the world often tend to be with those who share remarkably similar characteristics. Nonetheless, the resulting rivalry perhaps not only from this overlap but also from the tribalistic nature of Web 3 at this stage is unfortunate, but will be an important aspect of the Dotsama ecosystem to pay attention to and to see if it can be overcome. If such petty nonsense can be overcome, Polkadot (along with Kusama) is positioning itself to become the leader in the next phase of Web 3 development.